Forget progress claims finance—do this instead…
With new contracted work about to come on after a sustained period of growth our client approached us seeking a working capital solution to cash flow their operations in the next round of jobs.
Working in the commercial construction sector they had significant funds held back in retention and required $250k in working capital.
We approached a lender and who offered a 5 year unsecured term loan within 48 hours
An added benefit, this lender discounts interest for early repayment with a policy that charges the next fortnight’s scheduled interest and forgives the rest.
The 5-year term makes for a lower repayment throughout the loan and the early repayment policy saves interest meaning the best of both worlds.
With this lender having a favourable attitude to repeat borrowers and still accepting applications from businesses operating in the commercial construction sector this loan solution compares favourably to Progress Claims Finance which can be expensive.
Why This $250k Unsecured Term Loan was the Perfect Solution
This case highlights a scenario common among commercial construction businesses where significant funds are tied up in retention. These funds, often held back as a safeguard against potential project defects, can create a cash flow strain when companies need capital to pursue new projects or sustain operations. For this client, securing $250k in working capital was crucial to maintaining momentum and ensuring operational smoothness as they moved into their next phase of contracted work.
Key Features of the Loan Solution
1. Unsecured Loan
One of the most attractive aspects of this loan was that it was unsecured. For businesses operating in construction, where assets may be tied up in equipment, land, or property, an unsecured loan eliminates the need for offering security. Without the need for valuations the loan assessment was faster and easier than it would have otherwise been.
2. Fast Approval Time
Speed was another critical factor in this loan’s success. The lender’s ability to approve the $250k loan in just 48 hours provided a rapid solution to the client’s immediate working capital needs. For a business with time-sensitive projects, the ability to receive funds without the usual lengthy waiting periods can make all the difference by having the working capital to invest into the new project.
3. 5-Year Term for Better Cash Flow
While short-term loans can be beneficial for businesses that want a faster repayment period, they often come with higher, more frequent repayment instalments, which can place a strain on cash flow. By opting for a 5-year term, the client secured a much more manageable repayment schedule. This preferred loan term provided lower monthly payments, ensuring that the business could comfortably maintain its cash flow and continue funding new projects while still servicing the loan.
The Benefit of Early Repayment
One standout feature of this loan was its early repayment policy. The lender’s flexible attitude toward early repayment added significant value to the agreement. Under this policy, if the client decided to repay the loan early, they would only be required to pay the next fortnight’s scheduled interest. The rest of the interest would be forgiven.
This flexibility allows businesses to take advantage of their fluctuating cash flow patterns. For example, once funds tied up in retention are released, or they receive their progress payments, they can pay off the loan early without being burdened by excessive interest charges. The policy effectively allows businesses to get the best of both worlds: a long-term loan for manageable repayments and the opportunity to save on interest when their cash flow allows.
Comparison to Progress Claims Finance
In the construction industry, progress claims finance is often used to manage cash flow gaps. While this form of financing serves a similar purpose, it typically comes at a higher cost, both in terms of fees and interest rates. Progress claims finance often involves less flexibility more conditions, and the fees can cut into profit margins.
In contrast, the $250k unsecured term loan offered a much more cost-effective solution. Not only did it provide immediate access to working capital, but it also did so without the heavy fees that are sometimes associated with progress claims finance. Additionally, the flexibility in repayment terms and the ability to repay early without penalty made this loan a more sustainable and attractive option for the client.
Ongoing Relationship with the Lender
Finally, another advantage of this loan was the lender’s favourable attitude toward repeat borrowers, particularly those in the construction industry. For businesses that frequently need access to working capital, building a strong relationship with a lender that welcomes repeat borrowing can be a strong benefit.
