Why construction SMEs need an understanding of the finances available to them

Access to finance is important for job growth and business expansion and this is especially true in the construction industry.


With the supposed housing shortage hogging the headlines it would be easy to think that there might be a widespread amount of work available for the building trade.


But this is not exactly the case, as access to finance is preventing a number of construction SMEs from expanding, leaving many confused according to the Federation of Master Builders (FMB).


The National Audit Office (NAO) has highlighted the importance of business funding, while being very critical of the current methods in place regarding access to finance.


For construction firms, finance is especially important as materials for any work must be purchased before any job can begin.


On top of this, costs such as plant and staff hire must also be taken into account, as this can also require a significant portion of a working budget.


The value of early planning


Therefore there is a significant outlay before any returns can be seen – as a result if money runs out during a project, it can often require the help of corporate recovery specialists to put the situation right.


With big developments, lenders can fund the build but if there are insufficient funds they must then decide what steps to take to ensure their security.


There are plenty of property solutions available that will take into account all aspects of an individual case before deciding on the best course of action.


Access to finance for construction SMEs is therefore a vital way of helping to not only complete tasks but also to help companies expand and plug any housing shortfalls that exist in the country.


According to the FMB, two thirds of house builders are currently citing difficulties in obtaining finance as a major barrier to business expansion.


The NAO has suggested that SMEs will require an extra £22 billion by 2017, showing the importance of finance to small companies up and down the country.


Improving understanding in the construction sector could go a long way to assisting economic recovery and solving any housing shortages in the UK.


But considerable changes will need to be made before it can become a reality.


By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143. 

View all Business Insights