Progress claim financing is a specialised type of debtor finance designed to help trade contractors. It bridges the financial gap between raising a progress claim and receiving a payment from the client.
Commercial Capital is a leading provider of progress claim financing. We have over a decade of experience financing construction subcontractors in Australia. Our progress claim financing facilities have simple qualification requirements and can be deployed quickly.
Submit an enquiry form to have a representative contact you shortly.
Note: If your company is a construction subcontractor but does not raise progress claims, consider invoice financing instead.
Do you work on 30- to 60-day trading terms?
Construction trade contractors often give head contractors and other business clients 30 to 60 days to pay an invoice. Trading on 30-day terms is common and expected by your clients. However, it can also be challenging.
Trade contractors have several expenses that must be paid regularly. Expenses include wages, entitlements, suppliers, etc. These expenses are usually paid out of their cash reserves.
Using your cash reserves works well as long as they are sufficient to cover expenses until your invoices get paid. Otherwise, you will encounter cash flow problems. These problems can grow if not addressed promptly.
Progress claim financing helps companies with cash flow problems due to slow-paying progress claims. It finances your invoices, which improves your cash flow and provides the funds to cover business expenses.
How does progress claim financing work?
Progress claims or invoices are financed in two instalments. The first instalment is deposited into your account after you submit the invoice to the debtor financing company.
The size of this instalment is based on a percentage of the invoice, less any retained funds. It ranges from 60% to 80%, based on the transaction details.
The remaining funds are deposited as a second instalment once the customer pays the invoice on their usual trading terms. Transaction fees are typically deducted from the instalments and vary based on the transaction’s profile.
Clear benefits
Progress claim financing offers several benefits for subcontractors. These include the following:
- Improves cash flow
- Offer 30-day trading terms
- Can be deployed quickly
- Fewer covenants than other options
- Simpler qualification requirements
Simple qualification
Qualifying for invoice finance is simpler than obtaining other solutions of comparable size. The most important requirements include:
- Must be a trade contractor
- Operate under the Security of Payment Act
- Have financeable contracts
- ABN or ACN
- Creditworthy customers
- Offer 30- to 60-day trading terms
- Invoice after work is completed
- Unencumbered invoices
Submit an enquiry form to have a representative contact you shortly.
Special considerations
The debtor financing company must review all contracts to ensure their corresponding progress claims can be financed. Please keep the following in mind:
1. Liquidated damages
Most debtor financing companies will not finance a contract with a liquidated damages clause. This is due to the higher transaction risk.
2. Lump sum contracts
Most debtor financing companies will not finance invoices raised under a contract with a lump sum payment clause. This is due to the higher incidence of complications and general transaction risk.
3. Unfavourable clauses
Contracts are also reviewed for unfavourable clauses that could affect the transaction. Examples include non-assignment and offset clauses.
Is progress claim financing right for you?
A progress claim financing facility can help your company improve its cash flow if your company has:
- Cash flow problems due to slow-paying invoices
- Reasonable profit margins
- Qualifying contracts/transactions
Keep in mind that progress claim financing won’t be much help if your cash flow problems are due to other issues, such as low profitability.
Learning centre
We want to help you make an educated decision about progress claim financing and debtor financing. Commercial Capital maintains a learning centre with useful information about these services. Popular articles include: