Construction Invoice Finance at a Glance
Construction invoice finance advances cash against the money your customer already owes you, before the customer pays it. What makes it different from ordinary invoice finance is what you are asking the funder to lend against. In most of the industry it is not an invoice at all but an application for payment: a figure you submit under the contract, which the main contractor’s quantity surveyor then values, certifies, reduces or disputes.
That one difference drives everything else on this page, and it is why we have built this guide around the debt rather than around the product. Your application is cut by retention, cut again by any set-off the contractor applies, and cut a third time by a Construction Industry Scheme deduction before a penny reaches your account. The advance percentage a funder quotes you sits at the end of that queue, not the front of it, so a headline that sounds generous can still release far less than you expected.
| What it does | Advances cash against construction receivables so you can pay labour, materials and subcontractors before the main contractor settles |
|---|---|
| What it funds | Ordinary construction invoices, and, with the right funder, certified and uncertified applications for payment |
| Who publishes an uncertified capability | Bibby Financial Services and Ultimate Finance both say so on their own websites (checked 24 August 2026). Others fund construction without saying anything about applications at all |
| What the advance applies to | Eligible debt, which is what survives certification, retention, set-off and the CIS deduction. Never the value you applied for |
| What takes the money away | Reduced valuations, retention, contra charges, disputed variations, debtor concentration, CIS, and the VAT domestic reverse charge |
| What it costs | A discount charge on the cash you draw, plus a service fee charged on turnover |
| Bank Rate | 3.75%, unchanged since 18 December 2025 and held again on 30 July 2026 (Bank of England, checked 24 August 2026) |
| How fast large contractors pay | Large businesses in the construction sector took a median 33 days to pay suppliers in 2025, and paid 14% of invoices late (Department for Business and Trade, published 14 July 2026) |
| Best suited to | Subcontractors and specialist trades billing by monthly application against a small number of main contractors |
| Least suited to | Domestic and consumer work, and any business whose debt is routinely in dispute |
What Construction Invoice Finance Is
Construction invoice finance is working-capital funding secured against eligible construction receivables. Depending on the funder and the contract, those receivables can include ordinary invoices and some certified or uncertified applications for payment.
The qualification in that sentence is doing real work, and we have written it carefully rather than rounding it off. There is no single market answer to what a construction funder will accept, because the funders themselves disagree. Two of the specialists we checked publish that they will fund an application that has not been certified. Others serve construction perfectly well and say nothing at all about applications for payment, which usually means the conversation starts with your contracts rather than with a product sheet.
Mechanically the facility behaves like any other invoice finance arrangement. You submit the debt, the funder advances an agreed percentage of the part it accepts as eligible, your customer pays into a trust account, and the balance is released to you once the fees come off. The complication is entirely in the first step, because in construction the size and the certainty of that debt are both moving until the valuation is agreed.
Applications for Payment, Certification and Invoices
Most funding refusals in construction come down to a misunderstanding here, so it is worth being precise about the four documents involved and what each one proves.
A Standard Invoice
A standard invoice records a debt for work or goods already supplied, on terms that are usually settled before the job starts. Plenty of construction businesses raise them: plant hirers, materials suppliers, and trades working on smaller jobs outside a formal payment mechanism. If this is how you bill, you are in ordinary invoice-finance territory and most of the rest of this page is background rather than instruction.
An Application for Payment
An application for payment is a claim made under the contract’s own payment machinery, typically monthly, for the value of work done in that period. You submit a figure. The main contractor or its quantity surveyor then assesses it, and the number that comes back is frequently not the number you sent. Measurement disagreements, work the surveyor considers incomplete, and variations that have not been formally agreed all come off at this stage.
For a funder this is the whole problem in one document. An invoice asserts a settled debt. An application asserts a claim that somebody else is about to value, and the funder is being asked to advance money before that valuation happens.
Certified and Uncertified Applications
Once the contractor has assessed your application and issued a payment notice or certificate confirming the sum it considers due, the application is certified. That certificate is strong evidence of both the amount and the obligation, which is why certified applications are the easier of the two to fund and why some funders will look at nothing else.
An uncertified application has not reached that point. It may be entirely sound and it may be certified in full next week, but on the day you want the money there is no independent confirmation of what you are owed.
We checked the two specialists that publish a position on this. Bibby Financial Services states that it can release funds within 24 hours of an application being raised, certified or uncertified, and has been funding the sector since 2004. Ultimate Finance is equally direct, advertising funding in your account within 24 hours of raising uncertified applications for payment. Both claims are the providers’ own, taken from their own construction pages and checked on 24 August 2026, and neither should be read as a description of the wider market.
What Happens if the Valuation Is Reduced
This is the question subcontractors ask most often, and the answer is less alarming than it sounds provided you understand who carries the shortfall. A funder does not advance against the figure you submitted. It advances against the amount it assesses as eligible, which after a reduction means the certified sum rather than your application. If you have already drawn against the higher figure, the difference is normally recovered from your availability on the next drawdown, so the effect lands on your next month rather than as a demand.
Where reductions are routine rather than occasional, expect the funder to respond structurally. It may hold a larger reserve, fund a lower percentage, or move you from uncertified to certified applications only. None of that shows up in a headline rate, which is one reason two facilities quoted at the same percentage can deliver very different amounts of cash.
What Construction Debt Can Be Funded
The useful question is not whether construction businesses can get invoice finance, because they plainly can. It is which of the things sitting in your ledger a funder will actually treat as eligible debt, and what it is about each one that gives an underwriter pause. We have set the table below out by debt type for that reason.
Construction Funding Eligibility Matrix
| Debt or document | Fundable? | What the underwriter is actually looking at |
|---|---|---|
| Standard construction invoice | Usually | Ordinary checks on the debtor and on whether the work is complete. This is the easiest debt in the sector to fund |
| Certified application for payment | Specialists will | The certificate confirms the sum the contractor accepts is due, so the amount is no longer a matter of opinion |
| Uncertified application | Some specialists will | Entirely provider and contract dependent. Bibby and Ultimate Finance both publish that they fund these; most funders publish nothing |
| Interim or stage payment | Often | Depends on whether the valuation is agreed and where the payment sits in the contract’s own mechanism |
| Payment subject to a CIS deduction | Yes, on the right basis | The eligible figure has to reflect the deduction, because the contractor will not remit the gross sum to you |
| Retention | Treated separately | Not currently payable, so it is not equivalent to certified debt that falls due this month. See the retention section below |
| Agreed variation | Usually, once agreed | The question is whether the instruction and the valuation both exist in writing |
| Disputed variation or valuation | Difficult | A dispute attacks the certainty of the debt itself, which is the one thing the funder is relying on |
| Balance affected by contra or set-off | Reduced | The eligible amount drops by whatever the contractor is entitled to withhold, whether that is backcharges, attendance or plant |
| Domestic or consumer work | Rarely | Most invoice-finance facilities are built for business-to-business receivables, and consumer debt sits outside them |
Variations, Set-Off and Disputed Amounts
Set-off is the deduction we see catch people out most often, because it arrives after the valuation has been agreed and it reduces a figure you had already treated as safe. A main contractor may be entitled under the contract to withhold against defective work, delay, attendance, welfare, scaffold or plant it has provided, or a backcharge from another trade. Each of those is a legitimate contractual entitlement rather than a dispute, and each one lowers the sum the funder can rely on.
Variations are more straightforward but still slower than most subcontractors would like. If the instruction and the valuation are both documented, a variation behaves like any other measured work. If you have carried out extra work on a verbal instruction and the valuation is still being argued about, you have a claim rather than a debt, and no funder will treat the two the same way.
Debtor concentration then sits over all of it. Subcontracting is a concentrated trade by nature, and it is common for one or two main contractors to account for most of a year’s turnover. Funders limit how much of a facility can rest on a single debtor, so a ledger that looks healthy in total can still produce restricted availability once those limits are applied.
How Retentions Affect Construction Finance
Retention is money you have earned, that has been valued, that nobody disputes, and that you cannot have. We treat it as a separate section rather than a line in a table because it behaves nothing like the rest of the debt. It is the clearest example on this page of a cost the industry has simply come to accept, and the government is now legislating to stop it.
Typical Retention Structure
A retention clause lets your customer hold back a percentage of each payment as security against defects and against your own insolvency. Government consultation evidence puts the usual figure at 3 to 5% of contract value, with a standard rate of 3% applied in government construction contracts. Half is typically released at practical completion and the other half at the end of the defects liability period, which usually runs for 12 months and commonly 24 in housebuilding.
The sums involved are not trivial. The same government work estimated that between £3.2bn and £5.9bn of retentions was held across the sector in England in a given year, at 2015 prices. For an individual subcontractor the practical effect is that a slice of the margin on every job is unavailable for a year or more after the work is finished, and is exposed to the customer’s solvency for the whole of that time.
Can Retention Be Financed?
Two different questions hide inside this one, and conflating them is how pages end up promising something no funder offers. Funding the application you have submitted this month is routine. Financing the retained sum itself is not, because that money is not currently payable and will not be until a completion or defects milestone is reached that may be a year or two away.
In practice a construction facility funds the certified sum after retention has come off, and the retained portion sits outside the eligible debt until it falls due. Some funders will look at retention separately, usually on a case-by-case basis and often once it has been certified as released. Treat any facility that claims to advance against retention as an arrangement to read closely rather than a standard product feature, and ask specifically what event has to happen before the money moves.
Where UK Retention Reform Stands
Retentions are still lawful. That sentence matters, because the direction of travel has been widely reported and it is easy to come away with the impression that something has already changed. Nothing has.
What has happened is that the government announced on 24 March 2026 that it would ban the withholding of retention payments under construction contracts, and introduced the Commercial Payments Bill to Parliament in May 2026 to do it. The Bill completed its committee stage in the House of Lords on 21 July 2026 and still has its remaining Lords stages and all of its Commons stages to go. The government is aiming for Royal Assent during 2027, with commencement after that and a transition period so businesses can adjust.
The same Bill would also cap payment terms at 60 days where a large firm is paying a smaller supplier, and at 30 days for public authorities.
Separately, and already in force, companies within the payment-reporting rules that use qualifying construction contracts have had to report their retention practices for financial years beginning on or after 1 April 2025, under the Reporting on Payment Practices and Performance (Amendment) Regulations 2025. That is the first time retention behaviour has been visible in public data rather than inferred from anecdote, and it is worth knowing about before you sign with a new main contractor.
Retention law checked: 24 August 2026. This is a fast-moving area and we re-check it whenever the Bill moves.
How CIS Affects the Amount a Lender Advances
The Construction Industry Scheme is the reason the cash landing in your account is smaller than the sum that was certified. We found it missing from most competing guides to this product. If a page tells you what percentage a funder will advance without telling you what CIS does to the amount your customer will actually remit, it has answered the easy half of the question.
20%, 30% and Gross Payment Status
Under CIS the contractor deducts tax at source from what it pays you and hands it to HMRC on your behalf. The rate depends entirely on your registration status.
| Registered subcontractor | 20% deducted |
|---|---|
| Not registered | 30% deducted |
| Gross payment status | No deduction at all |
The money is not lost. It is credited against your own tax bill and can be reclaimed or offset in the normal way. But it is not cash in the month you needed it, and from a funder’s point of view what matters is that the debtor will never remit it to you, so it cannot sensibly form part of the debt being advanced against.
Gross payment status is worth chasing for exactly this reason. It removes the deduction entirely, which means the certified sum and the remitted cash are the same figure, and it makes the arithmetic on any funding facility considerably simpler.
Materials and the CIS Calculation
CIS is not 20% of your application. The deduction falls on the labour element, and HMRC requires the contractor to strip several things out of the gross figure before applying the percentage: VAT, materials you paid for directly, consumable stores, fuel other than fuel used for travelling, plant you have hired in from a third party, and the cost of manufacturing or prefabricating materials.
Two details catch people out. If you are VAT registered, the amount excluded is the VAT-exclusive cost of the materials; if you are not, the VAT you paid on those materials can be included in the materials figure. And the exclusion only covers materials you bought yourself. Materials supplied to you by the main contractor are not yours to deduct, so a job where the contractor is providing most of the material will produce a much larger deduction than the headline percentage suggests.
How the VAT Domestic Reverse Charge Affects Cash Flow
For most construction services supplied between VAT-registered businesses within the CIS framework, the customer accounts for the VAT to HMRC rather than paying it to you. You issue the application or invoice without adding VAT to the amount you will receive, and the customer deals with it on their own return.
The reason it belongs on a funding page is arithmetic rather than tax. If you were used to holding your customers’ VAT for a few weeks before handing it to HMRC, that float has gone, and a business that had quietly been running on it will feel the difference permanently rather than temporarily. HMRC itself tells businesses to check the effect on their cash flow before the charge applies to them.
It also means a VAT-inclusive figure is the wrong basis for any funding calculation on affected work, because that VAT is never coming to you. The charge does not apply to everything: supplies to an end user or intermediary supplier are outside it, as are things like architectural work and manufacturing materials off site. If you are unsure which of your contracts are caught, that is a conversation with your accountant rather than with your funder.
Construction Payment Law: Due Dates, Notices and Pay-When-Paid
Slow payment in construction is often explained away as pay-when-paid, and we think that explanation is usually wrong. Section 113 of the Housing Grants, Construction and Regeneration Act 1996 makes a clause conditioning your payment on the payer being paid by somebody further up the chain ineffective, and the only substantial exception is where that third party is genuinely insolvent. If a main contractor is telling you that it cannot pay because the client has not paid it, that is a commercial position rather than a contractual right.
Section 110 of the same Act sets the framework that ought to be protecting you. A construction contract must provide an adequate mechanism for working out what becomes due and when, and it must set a final date for payment of any sum that becomes due. The parties can agree the gap between the two, but they cannot leave it undefined; where a contract fails to provide these things, the Scheme for Construction Contracts fills the gap. Between them, those two sections give you a due date, a final date and a certified sum, which is precisely the evidence a funder needs.
None of this is legal advice, and payment disputes turn on the wording of the contract in front of you. But knowing that the framework exists changes how you read a funding decline. A funder that will not touch your debt is often reacting to what your contract does with these mechanisms rather than to your business.
Assignment of Receivables
Invoice finance depends on your right to assign the debt to the funder, and construction contracts have historically been fond of clauses that prohibit exactly that. The Business Contract Terms (Assignment of Receivables) Regulations 2018 make many of those clauses ineffective, which is a genuine improvement.
It does not follow that construction receivables can always be assigned, and compressing it that way would mislead you. The Regulations do not help a supplier that is a large enterprise or a special purpose vehicle, and regulation 4 carves out a list of contract types including those entered into with the project company of a utility project, a financed project, or a project designed wholly or mainly to develop land. Several of those descriptions fit construction work directly.
The honest sequence is that the receivable has to exist, the assignment has to be workable both legally and contractually, the funder has to accept the debt, and the amount still depends on everything else on this page. An anti-assignment clause being unenforceable removes one obstacle. It does not make the debt fundable.
How Much Can a Construction Business Actually Raise
Published construction advance rates run from roughly 50% at the cautious end to figures approaching 95% at the promotional end. We have not averaged them, because the average would describe nobody. The percentage is also the least important part of the calculation, because what it is applied to matters more than what it is.
From Application Value to Eligible Debt
Work down this chain rather than starting at the advertised percentage: the value you applied for, then the value the contractor accepted or certified, then retention off, then any contractual set-off off, which leaves the sum due. Take the CIS deduction off that and you have the cash your customer will actually remit. The funder’s eligible debt sits in that final stretch, and the advance percentage is applied to it.
Worked Example: a GBP100,000 Application
The figures below are a BusinessExpert calculation, not a quote and not market data. We have assumed a registered subcontractor on a 5% retention with gross payment status not held, an application made up of £70,000 labour and £30,000 of materials the subcontractor paid for directly, a quantity surveyor’s reduction of £5,000 against the labour element, a £1,500 contra charge for attendance, and an 85% advance. The reverse charge applies, so no VAT is added.
| Application submitted | £100,000 | What you claimed for the month’s work |
|---|---|---|
| Certified by the contractor | £95,000 | £5,000 of labour disallowed on measurement |
| Less retention at 5% | £4,750 | Held until completion and the end of the defects period |
| Less contra charge | £1,500 | Attendance and welfare recharged under the contract |
| Sum due | £88,750 | The figure the payment notice confirms |
| Less CIS at 20% | £11,750 | 20% of £58,750, being the sum due after the £30,000 of materials is excluded |
| Cash the contractor remits | £77,000 | What actually arrives, before any funding |
| Advance at 85% of that | £65,450 | Released to you on drawdown |
| Reserve | £11,550 | Released when the contractor pays, less the charges on the facility |
An 85% facility has released £65,450 against a £100,000 application. That is 65.5% of the figure you submitted, and the gap has nothing to do with the funder being ungenerous. It is a £5,000 valuation reduction, £4,750 of retention, a £1,500 contra and £11,750 of CIS, and the advance percentage only ever touched what was left.
Two things vary from this. Funders differ on whether they set the eligible debt at the sum due or at the post-CIS cash, and that choice alone moves the advance by several thousand pounds, so ask which basis a quote is using before you compare two of them. And we have applied the whole materials figure against this payment; where retention has already reduced what is being paid, agree the apportionment with the contractor rather than assuming it.
What Construction Invoice Finance Costs
Two charges do the work: a discount charge on the cash you draw, and a service fee on the turnover you put through the facility. Construction has no pricing model of its own, so we use the same cost structure here as across the rest of our invoice finance coverage. What changes is the base those charges are applied to, which is why two facilities quoted at similar rates can work out very differently.
The Discount Charge
This is interest on the money you have actually drawn, charged for the days you have it. It is normally quoted as a margin over the Bank of England Bank Rate, which has been 3.75% since 18 December 2025 and was held again at the meeting on 30 July 2026. A margin of 1.5 to 3 percentage points over that is common for established businesses, and the rate you are offered reflects your debtors and your dispute history as much as your own accounts.
The Service Fee
The service fee covers running the facility, and where you have chosen factoring it also covers collections and credit control. It is charged as a percentage of turnover put through the facility rather than of what you draw, so it is payable on the whole ledger. Something in the region of 0.5 to 2% is usual, with the lower end reserved for larger, cleaner ledgers.
Other Charges
Expect an arrangement fee at the start, an audit or survey fee for the funder’s periodic review of your ledger, and a minimum fee that applies if your turnover falls below the level the facility was priced on. Construction facilities frequently carry additional charges for the contract review work an underwriter has to do, and termination terms deserve reading before you sign rather than after.
When you compare quotes, compare what each one releases on the same application rather than what each one charges. A facility with a lower service fee that treats your uncertified applications as ineligible will leave you worse off than a dearer one that funds them.
Factoring or Invoice Discounting for a Construction Business
The choice between the two is the same in construction as anywhere else, and we cover the mechanics in full in our guides to invoice factoring and invoice discounting. The short version is that with factoring the funder collects from your customers and your customers know about it; with discounting you keep the collections and the arrangement can stay confidential.
In construction the disclosure question carries more weight than it does in most sectors, because your relationship with a main contractor’s commercial team is worth protecting and you will be negotiating a final account with those same people. Set against that, factoring brings credit control from a funder that deals with these contractors constantly, which is genuinely useful if chasing payment is currently your job as well as everything else.
Do not read either structure as an answer to the eligibility question. Neither factoring nor discounting says anything about whether the funder will accept an application for payment or an uncertified valuation. Product structure and debt eligibility are separate negotiations, and it is the second one that decides how much cash you get.
Construction Invoice Finance Providers Compared
Two of the four funders below commit in writing to funding uncertified applications for payment, and two publish nothing on the subject at all. If your billing runs on applications, that split is the most important thing on this page. We have limited each row to what the provider publishes on its own website, checked on 24 August 2026, and recorded silence as silence rather than inferring a capability that would fall apart at underwriting.
| Provider | Certified applications | Uncertified applications | What else it publishes |
|---|---|---|---|
| Bibby Financial Services Our Bibby review | Yes | Yes | Funds invoices and applications for payment, certified or uncertified, with funds available within 24 hours. In the sector since 2004. Publishes no advance rate, facility limit or turnover requirement on its construction page |
| Ultimate Finance | Yes | Yes | Advertises funding within 24 hours of raising uncertified applications. Working capital facilities up to £2m, minimum one year trading, minimum turnover over £600k. Publishes no advance rate |
| Close Brothers Invoice Finance Our Close Brothers review | Not publicly stated | Not publicly stated | Serves construction among many sectors and publishes up to 90% of invoice value on its general invoice finance product. Nothing published about applications for payment |
| Novuna Business Cash Flow | Not publicly stated | Not publicly stated | Its construction material is editorial and comparison content citing a 70 to 90% market range, rather than first-party product terms for a construction facility |
What that table shows is that a specialist construction facility is a real and identifiable thing rather than a marketing label. Committing in writing to fund an application nobody has certified is an underwriting position, and it is one a generalist funder has no reason to take.
The silence in the other two rows is just as informative. A funder that serves construction but publishes nothing about applications for payment is not necessarily going to refuse them, but it has not committed to anything either, and you will find out where you stand during underwriting rather than before it. If your billing runs on applications, ask that question in the first conversation and get the answer in writing. Our comparison of invoice finance companies covers the wider market and full terms.
If you would rather not approach funders one at a time, Tide Funding Options is a broker that puts one application in front of a panel of lenders, and BusinessExpert earns a commission if you take a facility through it. Ask the same question of whoever comes back: whether they fund applications for payment, and whether certification is a condition. A broker can shorten the search, but it cannot make a funder accept contractual debt it does not underwrite.
How Quickly Do UK Construction Companies Pay?
Large businesses in the construction sector took a median 33 days to pay their suppliers in 2025, and paid 14% of their invoices late by number and 13% by value. Those figures come from the Department for Business and Trade’s statistics on large business payment practices, published on 14 July 2026, and cover businesses classified in SIC section F.
Read against the all-sector median of 32 days, construction is close to typical rather than the outlier its reputation suggests, and its 14% late rate is slightly better than the 15% across all large businesses. We state that plainly even though it argues against the product on this page, because exaggerating how badly the sector pays would be selling you a facility on a false premise.
The number also has real limits. It is a median across large businesses, so it says nothing about any particular main contractor you work for, and it measures the time from invoice to payment rather than the whole cycle you actually live with. Your money is tied up from the moment you buy materials and pay labour, through valuation and certification, to a payment 33 days after that, and then a slice of it stays behind in retention for a year. The payment statistic captures one leg of that journey.
Since financial years beginning on or after 1 April 2025, in-scope companies with qualifying construction contracts have also had to report their retention practices. That data is public, it is contractor by contractor, and it is worth checking before you take on a new main contractor rather than after.
Who It Suits, and Who It Does Not
Construction invoice finance earns its cost where the delay between doing the work and being paid for it is structural rather than occasional. That is the first test we apply. That describes most subcontractors and specialist trades billing monthly by application: groundworkers, mechanical and electrical contractors, civil engineering firms and fit-out businesses carrying labour and material costs for weeks before a valuation is even assessed. If you are turning down work because the cash is committed to the job you are already on, this is the product that addresses it.
Main contractors use it less often and for different reasons, usually to fund a gap in a specific programme rather than to run the business. Where a main contractor is holding retention from its own supply chain while waiting on certification from the client, the arithmetic is quite different from a subcontractor’s.
It works badly in three situations, and it is better to know now. Domestic and consumer work usually sits outside these facilities entirely. A business whose valuations are routinely disputed will find that the debt a funder considers eligible keeps shrinking, and the facility will disappoint every month. And if the real problem is that a job was priced too thin, invoice finance will bring the loss forward rather than prevent it, which is an expensive way to discover a pricing error.
Construction Invoice Finance FAQs
Can construction companies get invoice finance?
Yes, and it is a well-established route for subcontractors and specialist trades. The difference from ordinary invoice finance is what you are asking a funder to lend against. Construction debt usually arrives as an application for payment that has to be valued and certified, and is then reduced by retention, contractual set-off and a CIS deduction. Because of that, it is normally arranged with a funder that underwrites construction contracts rather than one that treats your application as if it were an invoice.
Can an application for payment be financed?
With the right funder, yes. An application is a claim made under the contract’s payment mechanism rather than a settled debt, so it carries more uncertainty than an invoice and not every provider will take it. Specialists that publish a construction proposition generally will. Ask directly whether applications are eligible before you compare rates, because a cheaper facility that excludes them will release less cash than a dearer one that includes them.
Can an uncertified application be funded?
Some specialists fund uncertified applications and say so in writing. Bibby Financial Services states it can release funds within 24 hours of an application being raised, certified or uncertified, and Ultimate Finance advertises funding within 24 hours of raising uncertified applications for payment. Both were checked on 24 August 2026 and both are the providers’ own claims. Other construction-capable funders publish nothing on the subject, which is not a refusal but is also not a commitment.
Can CIS invoices be financed?
Yes, provided the eligible amount is set on the right basis. Under the Construction Industry Scheme the contractor deducts 20% from a registered subcontractor or 30% from an unregistered one and pays it to HMRC, so that money never reaches your account. The deduction falls on the labour element only: VAT, materials you paid for directly, consumable stores, fuel other than for travelling and third-party plant hire all come off the gross figure first. A funder advancing against your gross application would be advancing against money the debtor is never going to send.
Can retentions be financed?
Not usually, and it is worth separating two questions. Funding the certified application after retention has come off is routine. Financing the retained sum itself is different, because that money is not currently payable and will not be until practical completion or the end of the defects liability period, often a year or more away. Some funders will consider retention case by case, generally once it has been certified as released.
Have construction retentions been banned?
No. As at 24 August 2026 retentions remain lawful. The government announced on 24 March 2026 that it would ban the withholding of retention payments under construction contracts, and the Commercial Payments Bill was introduced to Parliament in May 2026 to do it. The Bill completed its House of Lords committee stage on 21 July 2026 and still has its remaining Lords stages and all of its Commons stages ahead. The government is aiming for Royal Assent during 2027, with commencement after that and a transition period.
Will my main contractor know I am using invoice finance?
It depends which structure you choose. With factoring the funder collects payment from your customers, so the arrangement is disclosed. With invoice discounting you keep the collections and the facility can remain confidential, subject to the funder agreeing to that. In construction the question carries extra weight, because you will be negotiating a final account with the same commercial team.
What happens if my application is reduced?
The funder advances against the amount it assesses as eligible, which after a reduction means the certified figure rather than the one you submitted. If you have already drawn against the higher figure, the difference is normally recovered from your availability on the next drawdown rather than demanded back. Where reductions happen regularly, expect a funder to hold a larger reserve or lower the advance percentage.
How much does construction invoice finance cost?
Two charges do most of the work. The discount charge is interest on the cash you have drawn, usually quoted as a margin over the Bank of England Bank Rate, which has been 3.75% since 18 December 2025 and was held again on 30 July 2026. A margin of 1.5 to 3 percentage points is common. The service fee covers running the facility and credit control where applicable, typically 0.5 to 2% of the turnover put through it. Arrangement, audit and minimum fees usually sit on top.
How quickly can the money be released?
Once a facility is running, funders advertise release within 24 hours of an approved application or invoice, and both specialists we checked publish that timescale. Setting the facility up takes longer, because a construction underwriter has to read the contracts as well as the accounts. Expect a week or more for a first drawdown.
Is construction invoice finance regulated?
Commercial invoice finance provided to a limited company is not an FCA-regulated activity, so the protections that apply to consumer credit do not apply here. That places the responsibility on you to read the facility agreement, and particularly the terms covering reserves, recourse, ineligible debt and termination, before you sign.
How we reviewed construction invoice finance
What we covered. How invoice finance works against UK construction receivables: applications for payment and certification, what retention, contractual set-off and CIS take out of an application before it is funded, the effect of the VAT domestic reverse charge, the statutory payment framework, what a facility costs, and which providers publish a construction capability. We do not use comparison-site summaries or aggregator data.
Data sources. Every volatile figure on this page was taken from a primary source and checked on 24 August 2026. CIS rates and the materials rules come from HMRC guidance; the VAT domestic reverse charge from HMRC; sections 110 and 113 from the Housing Grants, Construction and Regeneration Act 1996 on legislation.gov.uk; the assignment position from the Business Contract Terms (Assignment of Receivables) Regulations 2018; retention percentages and the reform timetable from government consultation material, the 24 March 2026 announcement and the Commercial Payments Bill; payment performance from the Department for Business and Trade’s large business payment practices statistics published on 14 July 2026; and Bank Rate from the Bank of England.
How we treated provider claims. Each provider’s construction capability was read from that provider’s own website, not from a directory. Where a provider publishes no advance rate, no facility limit or nothing about applications for payment, we have recorded that as not publicly stated rather than filling the gap with a market average. Where a provider does publish a figure, it stays attributed to that provider.
How we handle gaps. We have not published a typical construction advance rate, because the market claims run from roughly 50% to figures approaching 95% and blending them produces a number that describes nobody. The worked example is a BusinessExpert calculation with its assumptions stated, and is not a quote.
Update cadence. We re-verify this page regularly, and specifically whenever Bank Rate moves, CIS rates change, or the Commercial Payments Bill reaches a new parliamentary stage. Some links on this page are affiliate links, see our editorial policy.
Regulatory note. This page is editorial content, not regulated financial advice, and nothing in the payment-law section is legal advice. Commercial invoice finance to a limited company is not an FCA-regulated activity, so compare facilities and read the agreement before you sign.