Willmott Dixon has confirmed to Construction News it will extend payment terms to 65 days for suppliers that sign up to its new supply chain finance scheme.
Subcontractors that choose to join the early payment scheme will have their payment terms extended from their existing terms to 65 days.
They will then be able to access payments from Lloyds Bank from 21 days after the valuation date of the invoice if they are on 30-day terms, and 28 days after the valuation date of the notice if they are on 42-day terms, for a 2 per cent APR interest fee.
According to a document on the new scheme, seen by Construction News, if payments are not drawn down early, they will be paid 65 days after the end of the month in which the valuation of the invoice takes place.
A Willmott Dixon spokesman said: “The EarlyPay scheme is totally voluntary, you can opt in or out at any time and if you opt in, the 65 days is the extended term of the voluntary side agreement that unlocks access to payments up to 14 days earlier than the current 30/42 day terms.
“It is not a change to standard terms. Suppliers can terminate the arrangement at any time on 30 days’ notice and return to their existing 30/42 day terms without delay or penalty.”
Supply chain finance schemes
Carillion became the first major contractor to introduce an early payment scheme in March 2013.
Its early payment facility required subcontractors to agree to 120-day payment terms, but it has insisted that its supply chain gets paid at the same time they did before the scheme was introduced, or earlier through the scheme.
Balfour Beatty launched a supply chain finance scheme last September, allowing subcontractors to access payment from banks as soon as invoices are approved, but did not extend its standard payment terms. Balfour Beatty said its average payment term is 31 days.
ISG, Kier and Wates are among the other contractors to have considered, or implemented, reverse factoring facilities.
Willmott Dixon said it will automatically refund any interest costs for subcontractors on the difference between their final payment date under existing contracts and their new 65-day terms.
This means subcontractors that sign up to EarlyPay and agree to 65-day payment terms would pay an interest charge only on payments drawn down earlier than their existing contracts allow.
Earlier this month, Willmott Dixon revealed it would introduce the EarlyPay scheme for subcontractors following enquiries from Construction News.
The reverse factoring payment scheme has been developed with Lloyds Bank and will be introduced next month.