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Understanding construction loans for businesses

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What is a construction loan?

A construction loan is a short-term financial solution designed to help businesses and property developers fund building projects. Unlike traditional mortgages, which cover completed properties, construction loans provide staged payments throughout the development process, ensuring cash flow remains steady as work progresses.

How do construction loans work?

A construction loan releases funds in stages as different phases of a building project are completed. This ensures that money is available when it’s needed while minimising the risk of over-borrowing.

The construction loan process:

  1. Application & approval – Submit your project plans and financial details.
  2. Initial funding – Receive an initial advance to begin construction.
  3. Staged drawdowns – Further funds are released as milestones are reached.
  4. Completion & repayment – Once the project is completed, you either refinance into a long-term loan or repay the balance.

This structure ensures that businesses and developers can efficiently manage costs while keeping projects on track.

When do businesses need a construction loan?

A construction loan is ideal for businesses and developers looking to:

1. Finance new property developments

Secure funding for residential, commercial, or mixed-use development projects.

2. Expand or renovate business premises

Upgrade your office, retail space, or industrial facility without straining cash flow.

3. Fund land purchase & early-stage costs

Cover the costs of acquiring land and initial site preparation.

4. Manage contractor and supplier payments

Ensure smooth cash flow throughout a project, keeping construction work on schedule.

5. Bridge finance gaps in larger developments

Short-term funding to cover expenses while waiting for longer-term financing or property sales proceeds.

Types of business bridging loans

Commercial construction loans

Designed for businesses developing office spaces, retail units, warehouses, and industrial facilities. These loans ensure you can fund each stage of your commercial project without cash flow disruptions.

Development finance loans

Short-term financing for large-scale residential and commercial developments. Often used by experienced developers looking to fund multi-phase projects.

Refurbishment loans

For businesses or developers renovating existing buildings, whether for resale, rental income, or business expansion.

Residential construction loans

Ideal for property developers building new homes, whether individual properties or multi-unit developments. Funding is released in stages to match the progress of the build.

Bridging loans for construction

For developers needing quick access to funds while waiting for planning approvals, investment releases, or long-term finance solutions.

Have you thought about invoice finance as a quick financing solution for your business?

Invoice finance allows you to release cash quickly from your unpaid invoices.

As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available such as factoring (mainly invoice factoring and debt factoring) and invoice discounting to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our confidential invoice discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

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The benefits of fast business financing companies such as Novuna Business Cash Flow

  • Boost your cash flow without having to wait up to 120 days for your customers to pay you

  • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled

  • Access funds within 24 hours from initial appointment with our revolutionary digital onboarding process

  • Benefit from our in-house credit control processes, allowing you to focus on running your business, instead of chasing clients for payment

  • Six month trial period followed by a rolling contract

Want to understand more cash flow finance terms?

Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.

We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.

Quickly get the best cash flow finance solution for your business, simply fill out the requirements below:

We'll compare the best cash flow financing products available to get you the best deal.

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