Building firms move to invoices as traditional finance dries up

 
Ben Southwood
Follow Ben
HARD-PRESSED construction firms are turning to invoice financing due to an inability to get traditional credit from banks, according to research out today.

The number of building companies borrowing against unpaid invoices jumped 17 per cent in 2012, accountant Wilkins Kennedy said this morning, from 1,629 firms in 2011 to 1,911 this year. The latest figures came as bank lending to firms in the construction sector fell 17 per cent to £20bn, according to Bank of England data.

“The construction industry has been badly hurt by the reluctance of banks to lend to even the most solvent businesses in this sector,” said Wilkins Kennedy head of property Nick Parrett. He said banks had been put off by previous bad experiences.

“New finance is the lifeblood of any business and, without bank lending, construction firms are having to pursue alternative options,” Parrett added.

Invoice financing has been growing in popularity since before the financial crisis. Just 1,160 of construction firms used invoice finances in 2007, the accounting firm said, meaning the adoption of this form of financing has exploded by 65 per cent in just five years.