Property services business finance for maintenance, FM and consultancy firms

Most of the sector works to a pattern that stretches working capital. A maintenance firm wins a planned preventive maintenance contract with a housing association or a commercial landlord. It recruits operatives, buys or leases vans, stocks materials and pays wages weekly. It then invoices monthly in arrears, and the client pays on 30 or 60 day terms, sometimes later if an invoice has to be matched to a purchase order or approved by a surveyor first.

Managing agents add another layer. When they instruct contractors on behalf of a block or estate, they often pay once service charge money has been collected, so a contractor can be waiting on hundreds of leaseholders it has never met. Reactive jobs, such as leaks, lock changes and boiler failures, are billed job by job, which creates a large number of small invoices and some disputes over scope.

Repairs and alterations to buildings usually count as construction operations, so many property services firms work within the Construction Industry Scheme. A subcontractor paid net of deductions under the CIS rules for subcontractors has less cash coming in each month than its invoices suggest until the deductions are reclaimed, which lenders factor into affordability.

A single lender's appetite can cap what a growing property services firm can raise, even when the business can afford more. In one SFS case, an established property consultancy needed £234,000. Rather than accept one lender's maximum, we arranged three separate £78,000 facilities, each progressed independently through documentation and completion, so the business obtained materially more than a single facility would necessarily have delivered.

Stacking facilities is not right for every business. Each carries its own repayments and terms, so the total must be affordable from the business's cash flow, and lenders will see each other's facilities on credit files. It works where the requirement is genuine and the combined repayments have been modelled honestly.

Borrowing to cover a client that pays late treats the symptom. Before taking finance, check that your terms and invoicing are tight and that you are using your statutory right to charge interest on late commercial payments where the relationship allows. If a tax bill is the pressure point, compare a loan with HMRC Time to Pay, which our guide to Time to Pay versus a tax loan explains.

Invoice finance contracts can have minimum terms and notice periods, and personal guarantees on unsecured loans put directors' own assets on the line. Winning a large contract on thin margins and borrowing to mobilise it is the classic way property services firms overtrade.