Early payment facilities
Early payment facilities

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Early payment facilities
  • What is an early payment facility?
  • How does it work?
  • Advantages to sub-contractors
  • Disadvantages to sub-contractors

Early payment facilities

What is an early payment facility?

An 'early payment facility' (EPF), or 'supplier finance scheme', is an arrangement set up by a main contractor supported by a bank/banks, which allows sub-contractors to be paid in advance of the contractual payment terms contained in the sub-contract. This Practice Note refers to EPF agreements entered into between a main contractor and a sub-contractor, but this could also apply to other suppliers.

EPFs are part of a 'Supply Chain Finance Scheme' announced by the government in 2012 with the intention of supporting suppliers by allowing them to access credit at lower cost and improve cash-flow. EPFs are not restricted to the construction industry—a number of large companies, including retailers, telecoms and automotive companies also offer these sorts of schemes to their suppliers. For further information on government backed schemes to encourage faster payment see Practice Note: Encouraging fair payment in the construction industry.

Feedback from the construction industry suggests that a large number of sub-contractors are signed up to these sorts of schemes. A sub-contractor may therefore find that it is able to sign up to EPF agreements with a number of main contractors to access payment sooner. Although there are benefits to EPFs, there are also some potential disadvantages which have caused some in the construction industry to criticise these schemes.

How does it work?

To offer an EPF,

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