Construction/ Escrow Finance

Construction/ Escrow Finance

An escrow facility allows for multiple payments to be made in acquiring an asset, prior to the final finance commencing. An example of this would be ordering a machine that needed to be manufactured and required progress payments at various stages, for example;

- On ordering - 10%
- Mid-point of construction (two months) - 40%
- On completion of manufacturing, but prior to delivery (four months) - 30%
- Commissioning (six months) - 20%

Under this type of facility, interest is paid monthly and expensed or in some cases capitalised into the drawn down amount. Once all payments have been made and the equipment commissioned, the amount drawn down forms the basis of the equipment finance and the escrow facility rolls into the final financing, such as hire purchase, chattel mortgage, finance lease, etc.

For more information, read our Guide to Finance

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