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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

June 14, 2017

Leading national working capital specialist, Scottish Pacific, has noted increasing requests from subcontractors for funding that will solve their specific cash flow issues. Scottish Pacific discusses four tips to help subbies smooth out cashflow, as they roll out Progress Claim Finance to assist in this area.

Construction subcontractors, who can struggle with cashflow due to the long wait to get paid, now have access to more flexible and accessible funding options with the launch of Scottish Pacific’s Progress Claim Finance.

Scottish Pacific’s Head of Specialised Finance, Craig Michie, said the new specialised solution opens up funding options to meet the growing funding demand from construction subcontractors, allowing them to fund larger contracts and use their business assets to grow.

“The construction industry relies on subcontractors, and on any major project there are dozens of specialist subbies. With the growth in residential unit construction, subcontractors face some very specific cash flow, working capital and growth challenges and they can find it very hard to get bank finance,” Mr Michie said.

“The downside is if they don’t get paid in a timely manner it can destroy the business. It’s not just a job that they’ve lost, they can lose the whole business which can have a catastrophic flow-on effect.

“Progress Claim Finance is for subcontractors raising invoices under the Security of Payments Act. It’s suitable for trades such as flooring, roofing, plumbing, formwork and electrical and is a great alternative to an overdraft, without the restrictions. Usually, no property security is needed, which means the business can use this for other purposes, or simply reduce their personal risk within the business,” he said.

Scottish Pacific’s cashflow tips for subcontractors:

  1. Consider when can you submit your claim and when will the contractor respond - ensure they are proposing to provide a Payment Schedule (apart from in WA) as this can be useful if there are issues.
  2. Confirm that the transaction is covered by the relevant Building and Construction Industry Security of Payments legislation (there are slight differences amongst the states).
  3. For cash flow purposes be very clear when payment is expected and remember that retentions will be deducted.
  4. Consider whether the size of the contract may potentially put a strain on your business’ cash flow, and if so talk to Scottish Pacific about their Progress Claim Finance which provides up to a 70% advance against the value of your progress claim.

Mr Michie said there has been a recent increase in funding enquiries from subcontractors but also from their business advisers such as brokers, bankers and accountants, indicating that construction subcontractors are finding it hard to get finance.

“For experienced, well established subcontractors with at least 4-5 years running their business, Progress Claim Finance secures finance to fund the business while waiting for contractors to pay,” Mr Michie said.

“This style of funding is already popular with labour hire businesses, where a debtor finance facility helps them pay staff weekly while they get paid by their own clients every 6 weeks. This trend will grow within construction due to the fact such a large element of cost is labour - when the weekly wage bill explodes not many can fund wages out of cashflow.”

Mr Michie cited a demolition client: “When a site is being redeveloped on day one they look for asbestos, which is time consuming and labour intensive, then they strip away the whole site. They issue monthly progress claims for all work done during the month. Most staff get paid weekly, but they raise their progress claims at the end of each month, which are generally signed off the following month and paid the month after that. So they might have 6-8 weeks of wages to fund before their client pays.”

“If this business did not have Progress Claim Finance they would need to source an overdraft which may well require personal assets as security, or fund wages themselves. This can put a real strain on cash flow. Progress Claim Finance allows the business to be funded by its own resources,” he said.

Progress Claim Finance allows experienced subbies to receive funds within 24 hours of a certified claim. By helping meet ongoing fixed and variable costs it can reduce the strain on business cash flow.

“We have subcontractors who use Progress Claim Finance to take advantage of volume and early payment discounts from suppliers, or to take on additional and larger projects or contracts,” Mr Michie said.

Progress Claim Finance at a glance

  • Up to 70% advanced against outstanding Progress Claims up to $750k in total funding
  • No real estate security required; funding can be used on an ongoing or once-off basis
  • Can be used on selected invoices as required, for complete flexibility and control

Examples of how PCF can assist subcontractors

SECTOR TURNOVER FUNDING LIMIT CONTRACT VALUE SCENARIO
Electrical contractor $16m $750k $6m Sought funding for rapid growth
External facades $7m $500k $750k Sought increased working capital to fund day to day operations
Flooring contractor $11m $750k $2.5m Required better cashflow to improve operations
Roofing contractor $13m $750k $1.8m Sought funding for growth

Scottish Pacific Business Finance is part of the Scottish Pacific Group (ASX:SCO) and is the largest specialist provider of working capital solutions for SMEs in Australia and New Zealand, with more than 1700 clients. Scottish Pacific handles more than $14 billion of invoices each year, providing debtor and trade finance funding exceeding $1 billion. Scottish Pacific was awarded 2016, 2015 and 2014 Best Cash Flow Lender as voted by brokers. Scottish Pacific is an ASX 300 company.

Follow Scottish Pacific Business Finance on Twitter - @ScottishPacific - and on LinkedIn

For media information contact:
Kathryn Britt
Cicero Communications    
Tel: 0414 661 616    

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