# Construction Invoice Finance & CIS Source: https://www.cashbookfinance.co.uk/insights/construction-invoice-finance-cis-retentions Last updated: 2026-10-26 Author: Bjorn Laku, Director & Chief Marketing Officer (https://www.bjornlaku.com/) Publisher: Cashbook Finance Limited > How invoice finance works for construction businesses - applications for payment, certified valuations, CIS deductions, retentions and what funders check. Sector FCA-registered UK lender FRN 782472 ## Invoice finance for construction: CIS, retentions and applications for payment Construction businesses can use invoice finance, but funders look closely at how the money is earned. Funding is usually based on work that has been certified and invoiced, net of CIS deductions, with retentions and disputed amounts left out. Selective funding of individual certified invoices is often a better fit than a whole-ledger facility. Written and reviewed by [Bjorn Laku](https://www.cashbookfinance.co.uk/bjorn-laku), Director & CMO. INV-2048 · Arden Health Group Illustration Cash received · this invoice A £50,000 invoice on 30-day terms - **Invoice value** £50,000 - **Paid to you, day 1–2** £45,000 - **When your customer pays** £4,000 Invoice value · £50,000 Illustrative: a 90% advance and a discount charge of about 2% of the invoice. Rates and advances vary by business, sector and customers. Check eligibility **£30m+** funded · **100+** UK businesses since 2019 · London SE1 - FCA **782472** - ICO **ZB545200** - Companies House **10723098** Worked example ### A certified application, net of retention and CIS. A subcontractor’s application for £60,000 is certified. The contractor holds back a 5% [retention](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-retention) and deducts CIS at 20% on the £20,000 labour element before paying in 30 days. Funding is sized on what the contractor will actually pay, not the gross application. Check eligibility · Talk it through with a director | Certified application | £60,000 | | --- | --- | | Less 5% retention, held until practical completion | −£3,000 | | Less CIS at 20% on £20,000 of labour | −£4,000 | | Net amount the contractor will pay | £53,000 | | Advanced within 24–48 hours (80% of the net amount) | £42,400 | | Discount charge, about 2% per 30 days, for 30 days | £1,060 | | Paid to you when the contractor pays | £9,540 | Illustrative: an 80% advance against the certified net amount and a [discount charge](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-discount-charge) of about 2% per 30 days. Retentions are usually funded separately, if at all. The [CIS deduction](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-cis-deduction) counts against your own tax and National Insurance; check the position with your accountant. **In this guide** - Why construction is different - What funders usually lend against - Whole ledger or selective? Check eligibility · About 2–3 minutes, no credit search. ### Why construction is different In most sectors an invoice is a straightforward claim for goods or services delivered. In construction, payment often depends on: - **[Applications for payment](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-applications-for-payment)** that the main contractor or client may reduce when they value the work; - **Certification** of the work by a surveyor or contract administrator; - **Pay less notices** and contra-charges, which can reduce what is actually paid; - **Retentions** held back until practical completion and the end of the defects period; - **CIS deductions** taken at source from payments to subcontractors. Each of these makes the final amount less certain than the invoice suggests, which is why funders adjust. ### What funders usually lend against - **Certified, invoiced work** for creditworthy clients, rather than applications that have not yet been valued. - **The net amount** you will actually receive: CIS deductions and agreed discounts come off before an advance is calculated. - **Not retentions**, which are typically excluded until they are released and invoiced. - **Not disputed or contra-charged amounts.** Check eligibility · About 2–3 minutes, no credit search. ### Whole ledger or selective? Many contractors invoice a small number of clients in large amounts, and some contracts carry more risk than others. Selective invoice finance lets you fund chosen certified invoices instead of the whole ledger. Compare the two in [selective vs full-ledger invoice finance](https://www.cashbookfinance.co.uk/insights/selective-invoice-finance-vs-full-ledger). ### What to prepare - Contracts or subcontract orders, including payment and retention terms; - Recent applications, valuations or certificates, and the invoices raised against them; - An aged debtor report and a list of any disputes, contra-charges or pay less notices; - CIS statements and evidence of your CIS status; - Management accounts and a short cash-flow forecast. The [invoice finance preparation checklist](https://www.cashbookfinance.co.uk/insights/invoice-finance-preparation-checklist) covers the general pack. ### Common reasons construction applications stall - Heavy reliance on one main contractor; - Large unagreed variations or frequent contra-charges; - Funding requested against applications that have not been certified; - Retentions counted as available funding. See also [why invoice finance applications are declined](https://www.cashbookfinance.co.uk/insights/why-invoice-finance-applications-are-declined) and the [construction sector page](https://www.cashbookfinance.co.uk/sector-construction). Check eligibility · About 2–3 minutes, no credit search. ### Construction invoice finance: a practical decision test The test for construction funding is how certain each payment is. Certified, invoiced work for creditworthy clients funds well; applications, retentions and disputed amounts do not. #### Commercial fit Best for contractors with certified work, reliable payers and a spread of clients rather than one dominant main contractor. #### Evidence and eligibility Expect funders to check contracts, certificates, payment notices and the history of contra-charges before setting availability. #### Operational fit Submit applications and invoices promptly, keep certification paperwork tidy and track pay less notices as they arrive. #### Alternatives Selective funding of individual certified invoices, trade finance for materials, or better payment terms can fit where whole-ledger funding does not. Check eligibility · About 2–3 minutes, no credit search. ### Construction invoice finance: model the downside, not just the headline Model availability using only certified, invoiced, net-of-CIS amounts, then stress it for a reduced valuation or a delayed certificate on your largest contract. #### Where this can go wrong Counting applications or retentions as fundable cash leads to shortfalls. A contra-charge or pay less notice late in a contract can reverse funding you had planned around. ### Construction invoice finance: questions to ask before signing - Will you fund against certified valuations only, or also against applications? - How are CIS deductions and retentions treated in the calculation? - What happens to funding if a client issues a pay less notice? - Can individual contracts or invoices be funded selectively? ### Construction invoice finance: documents and controls to prepare Every invoice finance discussion goes better with the same core pack: a current [aged-debt report](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-aged-debt-report), representative contracts and invoices with delivery or acceptance evidence, recent management accounts with a short cash forecast, and an honest schedule of [credit notes](https://www.cashbookfinance.co.uk/insights/invoice-finance-glossary#term-credit-note), bad debts and customer concentration. We keep one maintained resource covering the full pack, the questions that surface the all-in cost, and what to monitor once a facility is live - [read the invoice finance preparation checklist](https://www.cashbookfinance.co.uk/insights/invoice-finance-preparation-checklist). This guide is general information, not a recommendation or an offer of finance. #### See what your invoices could release Tell us how your business invoices and a director will give you a straight, no-obligation view on fit - usually within a day or two. Checklist #### Prepare for invoice finance: documents, controls and questions Bjorn Laku Underwriting #### Why invoice finance applications are declined Bjorn Laku Credit quality #### What makes a debtor ledger attractive to a lender Bjorn Laku ### Match the funding to how you get paid Use the guide to organise the evidence and operating decision, not simply to compare product labels. #### Applications Map application, valuation and certification dates for each contract. #### Deductions Show CIS deductions, retentions and contra charges, so the funded amount is the net amount. #### Contract terms Check pay-when-paid, set-off and assignment clauses before applying. #### Official sources - Construction Industry Scheme (CIS) · GOV.UK - Housing Grants, Construction and Regeneration Act 1996 legislation.gov.uk Official guidance and legislation on the rules this page refers to. They explain the rules in general; take advice on your own position. Check eligibility · About 2–3 minutes, no credit search. ### More guides on invoice finance - [Recourse vs non-recourse invoice finance](https://www.cashbookfinance.co.uk/insights/recourse-vs-non-recourse-invoice-finance) - [Working capital benefits](https://www.cashbookfinance.co.uk/insights/working-capital-benefits) - [Invoice finance in London](https://www.cashbookfinance.co.uk/invoice-finance-london) - [Asset-based lending vs invoice finance](https://www.cashbookfinance.co.uk/insights/asset-based-lending-vs-invoice-finance) - [CHOCs: client handles own collections](https://www.cashbookfinance.co.uk/insights/chocs-client-handles-own-collections) - [Export invoice finance](https://www.cashbookfinance.co.uk/insights/export-invoice-finance) #### Sector guidance - [Engineering finance](https://www.cashbookfinance.co.uk/sector-engineering) --- Cashbook Finance. Cashbook Finance Limited is registered with the Financial Conduct Authority under Firm Reference Number 782472. Company number 10723098. Registered office: Cumberland House, 24–28 Baxter Avenue, Southend-on-Sea, Essex SS2 6HZ. Registered with the Information Commissioner’s Office under reference ZB545200. All finance is subject to eligibility, satisfactory due diligence, credit approval and agreed terms. Invoice finance, trade finance and bridging finance may not be suitable for every business. The availability, structure, amount, pricing, fees, security requirements and completion timescales of any facility will depend on the applicant’s circumstances, the quality of the supporting evidence provided and our assessment of the proposed transaction. Any figures, examples, rates or timescales shown on this website are for illustrative purposes only and do not constitute an offer, commitment or guarantee of finance. Terms and conditions apply. Bridging finance is secured against property. Your property may be repossessed if you do not maintain repayments on a loan secured against it. Applicants should obtain independent legal, financial and tax advice where appropriate.