Construction invoice finance

The UK construction industry is dominated by a handful of giant corporations, multinational developers who build most of the largest, high profile construction projects in the country.

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on January 11, 2024. Next review due April 6, 2025.

    The lifeblood of the construction sector are the thousands of small and medium sized contractors and sub-contractors who carry out most of the physical construction work. For these businesses, as with nearly all UK SMEs, cash flow issues are commonplace, with 90% of small businesses experiencing a major cash crunch at least once a year. 

    In an industry notorious for late payments, long payment terms, and stage payments for part completed works, small constructors and sole traders are particularly vulnerable to cashflow problems – an issue that can impact existing and upcoming projects, paying suppliers and staff, or even create insolvency. But what can construction SMEs do? The answer may be found with invoice finance – a financial solution that can deliver up to 95% of invoice value as soon as the bill is raised.

    Read on to discover all you need to know about invoice finance for the construction industry, and how it can turn your cashflow problems into cashflow positivity. 

    What is invoice finance for construction?

    Invoice finance for construction are short-term loans that allow construction businesses to achieve early payment of a large percentage of the value of the invoices they raise. Typical early payments are 75% to 95% of the value of the invoice, paid within 24 to 48 hours of invoice creation, and with the balance paid as soon as the customer pays the bill on standard terms, (minus financing fees and interest). Depending on the type of invoice finance used, (see below), the customer may never know the invoice has been used to generate a loan. 

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      How does construction invoice finance work?

      Construction invoice finance utilises the security of a construction company’s unpaid invoices as the basis for a loan or an advance. It is a funding option for construction SMEs that have a minimum of £30,000 annual turnover and get paid by invoice in 14 days or more. Lenders can provide up to 95% of invoice value and a maximum of £5,000,000 in total credit.

      Construction invoice finance in practice:

      With construction invoice financing, you issue an invoice to a customer, then you receive a percentage of the invoice value as a loan from a lender. (The invoice financing company). Payment is usually made within 24 to 48 hours of submitting your invoice. 

      Depending on the type of invoice financing you chose, you may retain control of your sales ledger and still be responsible for chasing customers for payment. In this case, your customers post their payments into a trust account controlled by the invoice financing company, but with the appearance of an account controlled by you. The customer assumes they are paying you, not the lender. Once the loan is repaid, and the lender deducts interest and fees, the balance is transferred to your bank account. In most cases, the customer will never know you used the invoice as security for a loan. 

      Construction invoice financing can be used across your whole sales ledger, or you can choose the customers and the invoices you want to use for a loan. (This is called selective receivables financing). 

      In simple terms, construction invoice financing works the same as a revolving credit line or a series of short -term business loans. However, unlike those types of lending, with construction invoice financing, the borrower usually has no need to provide assets as collateral, nor are the owners or directors required to supply a personal guarantee.

      Invoice finance calculator

      Use our handy invoice finance calculator to get an understanding of how much you could release from invoices owed to you.


      * Will be paid to you when your client has paid the invoice in full and within the agreed invoice term.

      This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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      An example:

      You send an invoice for £10,000 to a customer. They usually take 60 days to pay the bill. This locks up the value of the invoice for two months and slows down your cashflow. 

      However, you have an agreement with an invoice financing company who will lend 80% of the value of the invoice as soon as it is raised. You submit a duplicate of the invoice to the lender, and they send £8,000 (80%) to your bank account within 48 hours. This is called the ‘pre-payment percentage’. 60 days later, the customer pays £10,000 into a trust account controlled by the lender. As this is confidential invoice-financing, the customer assumes they are making payment direct to you. The lender recoups the loan of £8,000 and after deducing fees and interest, they send the balance to your bank account. 

      In this example, the numbers may look like this:

      • Invoice value: £10,000
      • Loan sum: £8,000  (the pre-payment percentage)
      • Balance outstanding: £2,000
      • Sum paid by customer in 60 days: £10,000
      • Loan recouped: £8,000
      • Fees and interest: £300
      • Balance transferred to you: £1,700

      Why consider construction invoice finance?

      There are multiple benefits to using construction invoice finance for your business – and few downsides.


      • Get up to 95% of the value of the invoice in 24 to 48 hours
      • No more waiting weeks or even months for payment
      • Use your fast cashflow to expand your business and outgrow your competitors
      • Drive bigger discounts from suppliers by offering them faster payment
      • Keep control of your sales ledger
      • Your customers may never know you use your invoices as security for a loan


      • You will pay costs and interest for the loan(s)
      • If you have customers who are bad at paying their bills, the lender may not accept the invoices you raise against that customer’s account
      • If a customer takes too long to pay their bill, the lender may reject their invoice from the lending pool and ask for the return of the early payment they have already sent to you

      What types of invoice finance are available for the construction industry?

      There are three types of invoice finance available for the UK construction industry:

      This works as per the example shown above: 24 to 48 hours for payment, with 75% to 95% of the invoice value released as the pre-payment percentage. You retain control of your sales ledger and must chase customers for payment. The customer need never know you use your invoices as security for a loan.

      Works very much like invoice-financing, except now you sell your invoices to the lender (known as ‘the factor’) and they take control of your sales ledger. You do not need to do anything more, as the factor is responsible for chasing customers for payment. With this method, your customers will know you are using your invoices to generate a loan.

      Unlike construction invoice financing or factoring, where you obtain a loan against an unpaid invoice, accounts payable financing is a loan to pay for costs and materials incurred by your business – you use a loan to pay for services and materials to complete an order. 

      When you have to pay upfront for services and materials on a construction project, and your customer will not pay until the project is complete, it can place great strain on your cashflow. Account payable financing relieves that strain by advancing the cost of the services and materials, then recouping the loan from the customer when they pay their bill. The customer may never know you are buying services and materials with a loan, as their payment goes into a trust account controlled by the lender but appearing to be controlled by you. 

      How to get construction invoice finance

      Invoice finance for the UK construction sector is a specialist financial area, with every lender having their own criteria and differing rules of application. Construction SMEs seeking invoice financing may find themselves forever searching and making applications to lender after lender. The delays this can create could cause you to lose revenues and leave your business vulnerable to a damaging cashflow crunch. Instead, working with a broker, who can access construction invoice finance from a wide range of lenders is a better way to go. No more cold calls and endless demands for information, simply tell us what you need and leave the rest to us. 

      Get started with Swoop

      Stop waiting 30, 60, 90 days or more to get paid. Give your construction business the funds it needs to thrive. Register with Swoop to find the best rates, the best terms and the best construction invoice finance in the UK. 

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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      90% cash crunch:

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      Invoice finance:

      Invoice factoring:

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