Construction business loans — can I use invoice finance alongside materials finance or a working capital loan?

Short answer: Yes — in many cases you can use invoice finance alongside materials finance or a working capital loan, but it depends on lender priorities, existing security (charges), contract terms (assignment/retention clauses) and full disclosure between providers. This page explains when combining facilities works, what typically stops it, practical construction examples, the costs and risks to watch for, and how to prepare your business to improve approval chances. Ready to explore options? Get Quote Now — Free Eligibility Check (takes 2 minutes).

---

Quick summary: TL;DR

Combining invoice finance with materials finance or a working capital loan is commonly done in construction to manage two separate funding needs:

• Invoice finance releases funds tied up in progress claims and staged invoices.
• Materials finance pays suppliers up front or provides a purchase ledger facility for stock/materials.
• Working capital loans plug short-term cashflow gaps for payroll, plant hire or other overheads.

Most lenders will allow multiple facilities if (a) each facility takes security over different assets, or (b) the lenders agree priorities (e.g. a deed of priority or intercreditor agreement). The main blockers are broad fixed charges or exclusive debentures that claim all assets, and contracts that forbid invoice assignment or factor involvement.

Get Started — Free Quote

---

How invoice finance, materials finance and working capital loans differ

Understanding the mechanics helps explain why facilities can usually sit side‑by‑side.

• Invoice finance (factoring or discounting) — releases cash tied to unpaid invoices or staged payments. Lenders typically take either a fixed assignment of specific invoices or a broader charge over receivables. Can be with recourse (you remain liable) or non‑recourse.
• Materials finance — may include supplier finance, purchase‑order finance, or inventory/stock finance. Designed to fund materials or specific purchases until the job completes; security often sits over purchased stock or a specific contract’s materials.
• Working capital loan — short‑term loan, overdraft or revolving facility to cover general cashflow needs (payroll, sub‑contractors, plant hire). Security can vary: unsecured for smaller loans or asset‑backed with a charge over cash, plant or property for larger loans.

Key structural differences that affect co‑existence:

• Security: fixed charge (strong, specific) vs floating charge (over changing assets).
• Asset scope: receivables vs inventory vs general business assets.
• Priority: who gets paid first in insolvency – agreed by lenders or decided by charge registration date if not agreed.

---

Can you use them together? The practical view

a) Typical lender approach and why multiple facilities are possible

Many construction businesses run two or more facilities at once. Lenders know construction projects have staged cash flows and different asset types. Practical reasons lenders will allow multiple facilities:

• Each product targets a different asset: invoice finance over debtors, materials finance over stock/purchase orders, working capital over cash/plant.
• Lenders can agree priority or operate on a pari passu basis (equal ranking) via legal documentation.
• Brokers frequently package solutions so each provider understands the exposure and covenant structure.

What lenders typically require:

• Full disclosure of existing facilities and charges.
• Legal searches (Companies House, Land Registry) and consent or standstill agreements where necessary.
• Clear separation of collateral and covenant management (e.g., separate reporting lines).

b) Common restrictions & deal‑killers

Combining facilities can be blocked by a few typical issues:

• Exclusive debenture / fixed charge over all present and future assets: some funders (especially senior banks) ask for “all assets” security. That can prevent invoice assignment or materials finance unless the bank consents.
• Prior assignment of invoices: if a previous lender already has legal assignment of receivables, a factoring house can’t take the same invoices.
• Contract terms: some main contractors forbid assignment of payments or include clauses covering retention and pay‑when‑certified rules — factors check contracts carefully.
• Retentions and conditional payments: invoices subject to retention or long payment terms reduce what a factor will advance.

c) How brokers and lenders make it work in construction

Typical steps when multiple facilities are needed:

1. Map existing security and contract clauses.
2. Agree priority or carve‑outs (e.g., receivables carved out from a bank’s floating charge).
3. Prepare intercreditor or subordination agreements where practical.
4. Ensure clear operation protocols — who notifies whose customers, who collects, and reporting frequency.

Free Eligibility Check — Get Quote Now

---

Real‑world construction examples

Below are short, anonymised scenarios that show common structures and outcomes.

Example 1 — Small contractor on a 6‑week residential project

Situation: Builder needs materials up front and has 30–60 day payment terms once stages are certified.

Structure used: A supplier finance facility to pay materials invoices, plus invoice discounting for certified staged invoices. No other charges in place so the factor took a fixed assignment on raised invoices only. Outcome: materials arrived on time, cashflow smoothed, project completed without missed payments.

Example 2 — Specialist contractor with retentions and multiple jobs

Situation: Business has several ongoing contracts with retentions and long payment cycles. They have a small working capital loan secured on machinery.

Structure used: Selective invoice factoring for non‑retention invoices and a short‑term working capital facility for payroll and plant. The bank agreed a carve‑out for receivables after a legal priority agreement. Outcome: combined facilities allowed the firm to grow while managing covenant levels carefully.

Key lessons from these examples:

• Read contracts for assignment/retention clauses before signing a facility.
• Discuss existing secured lenders early — surprise discoveries kill deals.
• Match the facility to the asset: don’t use invoice finance to cover materials stock that another facility already secures.

---

Risks, costs and compliance considerations

Main risks

• Double‑charging the same asset — two lenders claiming the same invoices or stock.
• Priority disputes on insolvency — lenders may litigate if priorities are unclear.
• Increased combined cost — separate fees, interest and administration charges can make the overall price high.
• Covenant strain — multiple facilities create more reporting and higher covenant risk.

Typical costs to expect

• Invoice finance: facility fee, discount/advance rate, service/collection fees.
• Materials finance: arrangement fee, interest on advances, supplier fees (if SCF).
• Working capital loan: arrangement fee, interest, renewal fees.

Always ask for a full written schedule of fees and calculate the combined effective cost before committing.

Compliance & legal copy

Important: UK Business Loans is an introducer — we do not lend or provide regulated financial advice. Submitting an enquiry is free and does not affect your credit score. All offers are subject to lender terms, checks and underwriting. For impartial information about financial promotions and consumer protection, please check official guidance from the Financial Conduct Authority.

---

How to prepare your business to increase chances of approval

Lenders want clarity and simple risk mitigation. Prepare these before you enquire:

• Updated debtor ledger and invoice ageing (show cleared and disputed items clearly).
• Copies of key contracts including payment terms, retention clauses and assignment clauses.
• Purchase orders and supplier terms for materials/stock finance requests.
• Management accounts for the last 12–24 months and a short cashflow forecast covering the project.
• List of existing charges, mortgages or other finance and company searches (Companies House filings).

Documents lenders commonly ask for:

• Latest management accounts and bank statements.
• Contract schedules, certificates of work where invoiced amounts are certified.
• Proof of identity and company documents (director IDs, UTR/CIC if relevant).

Tip: tell any prospective lender about other facilities early — non‑disclosure is often the single biggest reason a combined structure collapses.

---

How UK Business Loans helps — matching & next steps

We introduce construction businesses to lenders and brokers that typically handle facilities from around £10,000 and above. Complete a short enquiry and we’ll match you with partners who understand construction cashflow, materials purchasing cycles and staged payments.

• Complete a two‑minute enquiry — it’s free and no obligation.
• We match you with lenders or brokers most likely to help, based on your contracts, security and credit profile.
• Matched partners will contact you with a quote and the next steps to apply.

Get Quote Now — Free Eligibility Check

---

FAQs

Can invoice finance be used if my contract has a retention clause?

Yes — but retentions reduce what a factor will advance. Many factors advance on the net, after retention, or will only factor the certified portion of an invoice once retention is released or insured.

Will using two financiers increase my effective costs?

Potentially. Each facility carries separate fees and interest. Compare combined costs and ask lenders for an itemised fee schedule before proceeding.

Do lenders insist on exclusivity for invoices?

Some invoice financiers ask for exclusivity over receivables. If exclusivity is required, you’ll need either the bank’s consent or a structured carve‑out to allow materials finance or a working capital facility.

Does enquiring through UK Business Loans affect my credit score?

No. Submitting an enquiry via our form does not affect your credit score. Lenders may carry out credit checks if you proceed with an application.

How quickly will I get a quote?

Typical responses are within hours during business hours; complex structures may take longer while lenders review contracts and security.

---

Final call to action & trust

If you’re balancing certified invoices, supplier bills and short‑term overheads, combining facilities can be a sensible way to manage cashflow — but the legal and security details matter. Fill in our short enquiry and we’ll introduce you to lenders or brokers who can assess the best structure for your contracts and cashflow.

Free, no obligation — recommended for construction firms needing £10,000 and up.

Get Matched to Construction Finance Specialists — Free Eligibility Check

---

Related resource: construction business loans

1) Can I use invoice finance with materials finance on a construction project?
Yes — often you can if each facility takes security over different assets or lenders agree priorities (via a deed of priority/intercreditor agreement) and you fully disclose existing charges.

2) Can I use invoice finance alongside a working capital loan?
Often yes, provided the working capital loan is secured over different assets (e.g. plant or cash) or the lenders agree a clear priority and reporting protocol.

3) What common things will stop me combining invoice, materials and working capital finance?
Deal‑killers include an exclusive debenture or broad fixed charge over all assets, prior assignment of receivables, and contract clauses that forbid invoice assignment or create long retentions.

4) How do lenders decide who gets paid first if I have multiple facilities?
Lenders either agree priorities in legal documentation (deed of priority/intercreditor agreement) or priority is determined by the order of registered charges if no agreement exists.

5) Will combining multiple finance facilities increase my overall costs?
Yes — each facility has separate fees, interest and admin charges, so always request an itemised fee schedule and calculate the combined effective cost before proceeding.

6) How do contract retentions affect invoice finance advances?
Retentions reduce the amount a factor will advance — many factors only advance on the certified portion or net of retention, or require insurance/guarantee for retained sums.

7) What documents do lenders typically ask for when structuring combined construction finance?
Prepare debtor ledgers and ageing reports, key contracts (including assignment/retention clauses), purchase orders, management accounts, bank statements and details of existing charges or mortgages.

8) Will submitting an enquiry through UK Business Loans affect my credit score?
No — an enquiry via UK Business Loans is free and does not affect your credit score, though individual lenders may carry out credit checks later if you apply.

9) How quickly can I expect a quote for construction invoice/materials/working capital finance?
You can often get initial quotes within hours during business hours, although more complex structures or searches for existing security can take longer while lenders review contracts.

10) How should I prepare my business to improve approval chances for combined facilities?
Map existing security, disclose all current facilities early, provide up‑to‑date accounts, a short cashflow forecast, contract certificates and a clear debtor ledger to demonstrate transparency and minimise lender risk.