Progress Claim Finance - Financial Steps

Progress claim finance, also known as construction finance or invoice finance for the construction industry, is a specialized financial solution designed to help construction companies manage their cash flow during the lifecycle of a project. In the construction industry, payment cycles can be lengthy. Subcontractors and contractors often face delays in receiving payments for completed work, as payments are usually made upon submission and approval of progress claims.

These progress claims detail the work completed to date and the associated costs. However, the process of submitting, verifying, and receiving payment for these claims can take weeks, or even months. This delay can create significant cash flow problems, hindering a company’s ability to pay suppliers, wages, and take on new projects. This is where progress claim finance steps in.

The core concept is that a finance provider advances a portion of the value of approved or submitted progress claims to the construction company. This provides immediate access to working capital, bridging the gap between completing the work and receiving payment from the client or principal contractor. The finance provider then collects the full amount from the client upon payment of the progress claim.

Several benefits are associated with progress claim finance. Improved cash flow is the most significant, allowing companies to meet their immediate financial obligations. This, in turn, fosters better relationships with suppliers and subcontractors, as timely payments build trust and reliability. Additionally, readily available capital enables businesses to take on larger or more complex projects, which they might otherwise be unable to manage due to cash flow constraints. Progress claim finance also allows for scaling operations and seizing new opportunities without the burden of payment delays.

There are different types of progress claim finance available, with variations in terms, fees, and advance rates. Some providers focus specifically on invoice factoring, where they purchase the invoice outright and take responsibility for collecting payment. Others offer secured lending facilities using progress claims as collateral. Understanding the specific needs of the construction company and the details of the projects involved is crucial when selecting a suitable finance provider.

Factors considered by finance providers when assessing applications include the contractor’s creditworthiness, the project’s viability, and the payment history of the client making the payments. They typically require evidence of completed work and approved progress claims, alongside financial documentation. While progress claim finance comes with fees and interest charges, the benefits of improved cash flow and increased operational capacity often outweigh the costs, making it a valuable tool for construction businesses looking to grow and thrive.