2 min read
The capital demands of drainage contracting
Drainage and sewer contractors — whether handling CCTV drain surveys, jetting, excavation, or lining — operate some of the most expensive specialist equipment in the construction trades. A combination jetter and vacuum tanker can cost well in excess of £100,000; CCTV survey rigs and robotic cutting equipment add further to the capital requirement.
For firms moving from domestic reactive work into commercial and infrastructure contracts, the step up in plant requirement is significant and rarely achievable from retained earnings alone. Asset finance or a term loan against the equipment allows a business to expand its capability without a prohibitive cash outflow.
Working capital on large civil drainage schemes
On multi-month civil drainage schemes for highways authorities, developers, or water companies, payment terms can stretch to 60 or 90 days from monthly application. With a site team drawing wages weekly and hire plant invoiced monthly, the gap between cash out and cash in can be several hundred thousand pounds on a medium-sized scheme.
Invoice finance against certified applications for payment, or a revolving credit facility, can eliminate this gap and allow the business to take on larger projects without straining its balance sheet.
Regulatory and compliance costs
Working in the sewer network requires EUSR National Water Hygiene Card holders, confined-space trained operatives, and compliance with the New Roads and Street Works Act where work affects the highway. Maintaining these accreditations, renewing plant insurance, and meeting any bond or performance-guarantee requirements on public contracts all represent costs that fall before project income arrives.
A modest revolving facility can carry these recurring compliance costs smoothly across the financial year without forcing the directors to use personal funds or delay certifications.
Frequently asked questions
Can we finance a tanker or jetter unit on an asset finance basis?
Asset finance — whether hire purchase or finance lease — is a common way for drainage firms to spread the cost of specialist plant. The accounting and tax treatment differs between the two structures, so confirm the preferred approach with your accountant before committing.
We work primarily for one water company. Is client concentration a problem?
Heavy reliance on a single client is a risk factor lenders will note. It does not disqualify a business, but expect the lender to ask how the firm would respond if that contract were not renewed, and what diversification plans exist.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.