Key Takeaways
- Progress claims finance is a funding solution tailored for the construction industry.
- It lets contractors and subcontractors access cash against certified progress claims before clients pay your invoice.
- This kind of financing helps business owners meet operational expenses like wages, supplier payments, and project costs without having to wait for long payment cycles.
- Lenders can advance up to 80% of the progress claim invoice within 24 hours once the claim is certified and approved.
- Progress Claims Finance is commonly used across Australian construction projects to keep work flowing smoothly.
Companies in Australia’s construction industry have their own set of cash flow challenges. Payments for big projects often come in stages and sometimes weeks or months after the work has started. However, daily costs like wages, materials, and equipment can’t wait. This creates a gap between the work that has been done and the money that has been received.
Progress claims finance is a way to bring cash recognition forward to fill that gap. It lets contractors and subcontractors get money that is tied up in certified progress claims, which makes sure they have the cash flow they need to keep projects going.
What is Progress Claims Funding?
Progress claims are requests for payment made by contractors for work they did during a certain stage of a building project. After these claims have been reviewed and approved, they represent money owed to the contractor.
The problem is that clients, whether they are property developers, head contractors, or government agencies, often have payment terms that can leave business owners unpaid for up to 90 days. For small businesses, waiting this long can put a lot of stress on cash flow.
With progress claims finance in Australia, contractors can borrow money against the value of these certified claims. This means that unpaid invoices can be turned into cash right away. It makes sure that contractors don’t have to stop working while they wait for money to come in.
Progress Claims Financing Explained: How it Works
Progress claims finance is quite straightforward. When a contractor submits a progress claim for completed work, that claim represents money owed.
With progress claims finance, a lender steps in to advance most of the value of the certified claim upfront, usually around 80%. The contractor can then use those funds immediately to cover wages, suppliers, or ongoing project costs.
Here’s how it works in a nutshell once you have a Progress Claims Finance Limit setup:
- Submit and Certify the Claim– As a contractor, you submit a progress claim for completed work, and once it’s approved, it becomes a certified claim.
- Get Early Funding– Instead of waiting for the client’s payment cycle, submit your invoice to your lender, who advances up to 80% of its value upfront.
- Repayment on Client Payment– When the client pays the full claim, the funds go to the lender. After deducting fees, the remaining balance is released back to you.
Why Progress Claims Finance Exists in Construction
The construction industry is particularly prone to cash flow challenges because:
- Projects are capital intensive, with significant upfront costs.
- Subcontractors and suppliers often need payment well before the client settles.
- Long payment cycles can leave contractors financially stretched.
Progress claims finance was developed specifically to address these challenges. It ensures contractors aren’t forced to rely on high interest short term loans to keep projects alive.
Benefits of Progress Claims Finance in Australia
Progress claims finance has a lot of benefits that go beyond just filling a cash flow gap. This kind of funding can make the difference between contractors and subcontractors in Australia’s construction industry keeping up with their commitments and falling behind on their projects.
1. Reliable Cash Flow
The main advantage is that you can turn a certified progress claim into cash right away. Contractors can get money quickly instead of waiting weeks or months for a client to pay. This means they always have cash flow during the project.
2. Meeting Payroll and Supplier Obligations
Construction companies have to pay their employees, subcontractors, equipment rentals, and suppliers on time. Progress claims finance makes sure that these obligations are met, which helps business owners keep good relationships with their staff and suppliers.
3. Keeping Projects on Schedule
With money available from verified claims, work can go on without being interrupted by financial problems. This helps you avoid penalties or damage to supplier credit in the future.
4. Supporting Business Growth
Many contractors don’t want to take on bigger or more projects because they don’t want to be stuck waiting for payments. Progress claims finance addresses this problem by making sure that businesses have access to working capital. This lets you tender for more work and grow business with more confidence.
5. Flexible Use of Funds
Progress claims funding can be used for a lot of different things, such as paying for labour, buying equipment, covering overhead costs, insurance, or even getting ready for the next project. This flexibility makes it a good way to handle both planned and unplanned costs.
6. Lower Reliance on Debt
Traditional term loans are often not a good choice to support working capital in construction businesses. On the other hand, progress claims finance with a revolving credit limit that is paid back when the client pays the claim, provides an evergreen source of funding when your customers pas your invoices.
7. Stability in a Competitive Industry
The construction industry in Australia is very competitive, with tight margins and deadlines. With a progress claims facility business owners can work with more confidence and address the fear of running out of cash.
Who Can Use Progress Claims Finance?
Most commonly, progress claims finance is used by:
- Contractors and subcontractors working on tier 1 or 2 commercial or government projects.
- Builders managing multiple subcontractors and suppliers.
- Specialist trades who face upfront costs but long payment cycles.
As long as the invoice is for approved claims and your customer has a suitable credit history, progress claims finance can be a viable option.
Common Questions About Progress Claims Finance
Is progress claims finance only for large contractors?
Lenders prefer funding progress claims for work completed on government infrastructure and from tier 1 and 2 contractors. Lenders might not extend financing to subcontractors doing other work due to risk.
How quickly can funds be accessed?
Funds are typically released within 24 hours once the invoice for the approved by the lender.
Is progress claims finance expensive?
Costs vary depending on whether the facility is secured and unsecured but, given the shorter lending time of progress claims finance, it can be cheaper than other forms unsecured lending.
Final Thoughts
Progress claims finance is a line of credit that was made just for the needs of the construction industry. It helps construction businesses by supporting cash flow, meet your supplier payments, and take on new opportunities with confidence by turning invoices into cash.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Unlock Working Capital Tied Up in Progress Claim Invoices
Get the cash you need to do business the way you want. Dark Horse Financial can help you secure progress claim financing with favourable rates and terms. Contact us today to learn more.
