September 30, 2016 Dia Sawyer
Do you ever get that defeated feeling on Friday when you finish a job only to turn in your payment
Do you ever get that defeated feeling on Friday when you finish a job only to turn in your payment app and invoice into the job trailer? Do you ever wish that you could just walk in the trailer, turn in the invoice and get paid the same day that you complete work? Well, that’s what Construction Finance can do. We buy invoices so that you can get paid when you actually complete work. Not 30-45 days later when your check is released on the company payment schedule.
After working in the construction industry for many years, we understand that you have employees to pay, materials to pay for and personal bills due as well. We can factor your invoice and we can be the ones waiting to be paid. And I promise we are enormously cheaper rate than the merchant cash advance company that is calling you daily!
Happy Friday- Payday to all our Construction Finance clients!!!
September 29, 2016 Dia Sawyer
The final video in our What is Construction Factoring series has tons of valuable information. Read this information here or
The final video in our What is Construction Factoring series has tons of valuable information. Read this information here or click below to watch the video. Over the last 6 blog posts and videos, we’ve shared a lot about contracting, construction, the ins and outs of what tier you fall under in the overall construction project. Also, the necessity of cash flow or working capital to keep everyone paid. So often times, our prospective clients that are wanting to sign up to factor their invoices with construction finance but I’m worried that my general contractor or my customer won’t like it. Or that they won’t let me do it, or may think less of me. We hear this all the time.
What we’ve found on the contrary that once you explain that the process to your customer, that you are selling an invoice for work that is already completed, they are pleased. That you are selling the invoice because you want to pay your materials on time, that you want to take advantage of those supply house discounts. Many supply houses offer discounts will give an early payment discount. Often times that discount alone offsets the fee that Construction Finance charges.
You general contractor requires you to submit unconditional or conditional lien wavers, proving that materials you’ve purchased have been paid for or will be paid for in the future. When you have a partner, such as Construction Finance, your lien wavers will be unconditional. You will have actually already paid for the materials before the customer pays you. So when the general contractors hear this, they are happy that we are yet another layer of protection for them. We ensure that no projects end up with lien wavers because vendors or suppliers haven’t been paid for materials purchased for the project.
It’s no fun to get to the end of a job and owe so much money to get that final lien waver. We find that our clients pay for materials as they go, using our funding. General contractors know that their lien wavers aren’t pending or conditional or waiting for those materials to be paid. No, they’re actually already paid for. General contractors like that. They also like knowing that you won’t be calling regularly asking, “when are you going to release that check, when are you going to release that check?” They like knowing that you have your cash flow in order. That know that you have money for your materials, they know that you are paying for your materials and they know that you have the cash flow to grow and take on more and more projects.
For example, one of our large clients was billing his customer about $100,00 a month on a large plumbing contract. Once he became a construction finance client we opened him a $250,000 line of credit that would be backed by his invoices. Now he has been awarded a 2.4 million dollar plumbing contract that will invoice $200,000 a month for the next 12 months. He shared with us that he could not have gotten the contract if he had not had Construction Finance’s help with working capital.
We have several success stories like the above. Another example is one of a seasonal contractor who invoice $300,000 to $400,000 dollars a month and has for many years. However, from March until October his expenses are so so high because of the seasonality of his particular job industry. So he has to spend, spend, spend for materials and labor until the end of summer. But then he has levelized billing plans with his customers so that he has a much more dependable income and receivables. So, he’s found that Construction Finance is a good partner to bridge that gap of the highs of summer and larger projects. He can use that working capital to pay expenses and employees during that exaggerated expense season of summer.
One more example is a small electrical client was awarded a large service contract for an international energy, gas, oil supplier. And like most large companies, they set the rules. One of the problems is that it pays every 45 days. He invoices them regularly. We partnered with him so that his growing crew can take on this job that was above and beyond and totally separate from what they normally work. So, with Construction Finance, he has a new revenue stream from a national energy company that pays him each month. We are able to keep him growing and taking on new projects.
Call John Sawyer at Construction Finance today to find out how we can help your company grow.
September 29, 2016 Dia Sawyer
Why is it important to know who you are and where you are in a building project? In our last
Why is it important to know who you are and where you are in a building project? In our last video and post we looked at the many tiers of subcontractors. Let’s dive deeper into why it’s important and how to make sure you get paid at the end of completing your portion of a large construction project.
So, let’s say that you are the counter top subcontractor and you have finished your countertops beautifully. No defects or chance of set offs. Now, he’d waiting for his check. And let’s say the casework contractor stops answering the phone. So, the casework contractor owes the countertop contractor $5,000. Now, here is where it becomes very important to know who you are and where you are in the grand scheme of the general project. If the casework contractor fails to pay the countertop contractor on the project, the counter top contractor has a right to send preliminary notices, intent to lien and ultimately file a lien on the project. However, if and ONLY if he does it in the timeline set by his state.
So, let’s say that he was on top of it and the countertop contractor sent a preliminary notice to the casework contractor. Then the casework contractor doesn’t reply. So the countertop contractor sends the notice to the finish work contractor. Now the finish work contractor says, “Wait! I’ve already paid the casework contractor!” Now the countertop contractor sends the notice all the way up the line to the general contractor and owner. Ultimately, the countertop contractor had to make a rucus to get paid his $5,000 and the casework contractor had taken off with his money.
So, who is going to pay the countertop contractor? Does the general contractor not require his subs, subs, subs to prove they have paid their subs? That is why it is important to know where to you fall in the project and what measures you need to take to make sure you get paid.
At Construction Finance, we can help you by filing the appropriate paperwork within your state’s timeline to make sure you are paid at the end of the job.
September 28, 2016 Dia Sawyer
“Who Are You?” by Pete Townsend and “The Who”, what does this have to do with contractors, sub contractors, factoring
“Who Are You?” by Pete Townsend and “The Who”, what does this have to do with contractors, sub contractors, factoring and Construction Finance? I was on a job site the other day talking to one of my clients and I was trying to share my information with another client. He was a dirt and site prep guy that had half a million dollars in equipment. Trac hoe, backhoes, bulldozers, drop trailers to pull his equipment. I asked him, “who all are you working for on this project?” He said, “John, I dig dirt. All I know is that they’re going to pay me on Friday.”
So ‘Who Are You?’ as a sub contractor? Look at the photo below to see the ‘typical contracting project.’
Typically in a construction project, there is an owner. He or she decides to start a project. So, he hires an architect. The architect usually doesn’t pay anyone outside his or her office. The owner and the architect decide on a good plan and choose a general contractor. The general contractor bids the project at an acceptable price. He agrees to hire sub contractors, buy materials to get the project done.
So, here’s where you come in. That general contractor hire a variety of sub contractors. Site prep work, pour concrete, electrical, plumbing, HVAC, drywall, and a variety of finishing techniques. Painting, wall paper, finish work, trim work, mill work and many many others. So, from there up, those are called ‘first tier subs’. These individuals have sub contracted with the general contractor.
Lets single out the finish contractor. That’s what I did many years go. I had around 15 finish carpenters that did a variety of finish work. Painters, mill workers, trim work etc. Let’s say you were hired as the finish contractor as a ‘first tier sub’. You bid the painting, trim carpentry, mill work, countertops and even backsplashes. You are going to be in charge of all that. You decide to hire a paint crew that’s not one of your employees. That paint crew become the ‘second tier sub’. You subbed out the painting portion of your bid. You also hired a finish carpentry crew outside your own employees. And you even hired a cabinet company and millwork crew. All these sub contractors are second tier sub contractors.
So your cabinet guy is pretty smart. So you decide to sub out the countertop job to him. And then he hires a guy to finish the counter tops. The countertop guy is now the ‘third tier sub’ on the project. He isn’t a specialist in backsplashes. So, he hires out a guy to finish the specialized alabaster backsplash.
The backsplash sub is now our ‘fourth tier sub’.
So, why is all this important? The first tier sub contractor receive a contract from the general contractor. This contract details in full what all exactly that the first tier subcontractor will complete, purchase and by when. It will also state on the first page that the subcontractor will also agree to the terms and conditions that the general contractor agreed to in his signed contract. The ‘prime contract’ between the owner and the general contractor.
It is so important for you to know what was agreed upon by the owner and general contractor. The general contractor probably agreed to have the finish work completed by a certain date. That information is extremely important for you to know. These terms and agreements will trickle down to you. As a first tier sub, these terms and conditions will be very apparent to you. What deadlines, materials etc. are expected from you. However, the second, third and fourth tier sub contractor may not know what the first tier and general contractor signed in their contracts. Many times they don’t ask to see the contracts.
So, if you are wanting to take on bigger projects and bid larger contracts it is extremely important to know where you fall in the tiers of the overall project. ‘Who Are You’ in a large project is very important when you need to be certain that you will be paid in full at the end of the project.
September 27, 2016 Dia Sawyer
We’ve gone over the difference between these quick working capital advances verses selling invoices to a factor. So now, let’s
We’ve gone over the difference between these quick working capital advances verses selling invoices to a factor. So now, let’s walk through what most of our clients see as a typical job scenario. Most of our clients are large sub contractors or service providers on larger projects. Watch this video as John Sawyer, owner of Construction Finance breaks it down.
Here would be an example, there’s a general contractor on a project. Let’s say the project starts on September 1, 2016. Let’s say your company was just awarded this job and it’s a little bit larger than you’re used to receiving.
Let’s say you’re used to paying 10 employees at $200 per day each. You’re paying $2000 a day and you begin the job on 9-1. Most large construction projects allow you to invoice by the 20th – 25th of the month. So if you submit your invoice to be approved for payment on the 20th, then you’ve already spent $2000 a day for 20 days paying employees. Now, this isn’t even including materials, overhead or your paycheck. So you’ve already got out $40,000 in basic payroll out before you ever send your first invoice in for payment approval.
Typically we’ve found with our clients that they need an architect’s approval, project manager’s approval that the work has been done, there are no set offs and no defects. The architect needs to sign off and then the owner needs to approve the work and agrees to submit payment for the invoice the following week. On a good payment cycle the general contractor will receive that payment on 10-10 and most G.C’s are typically good about releasing those funds to the underlying sub contractors. So, around 10-15 you receive your money for the $40,000 that was accumulated in the first 20 days of the project. However, we are now at ANOTHER 20-25 days out and only just now receiving payment for the first invoice.
So, if this is a 2 or 3 month project, there’s another $30,000 or $40,000 and possible to have $70,000 to $80,000 out before you even receive your first invoice payment check.
Many of you have no cash flow issues whatsoever. But some of you may want to take that job that’s a little bit larger and the profit margins a little bit bigger. Jobs where you walk home with more money when the project is over. And when you get your punch list money, you get to keep it! You made a bunch more profit.
Consider this, when you first started that job and invoiced $40,000 on the 20th, we would have purchased that invoice for $40,000. We would have funded you the day you invoiced, so long as everything was approved. You wouldn’t have had to wait that second round of invoicing and would have only had to float half as much money.
Construction Finance will purchase your invoice and fund you the day of invoicing. We will wait for the architects, owners and general contractors to release the payment.
September 26, 2016 Dia Sawyer
Owner of Construction Finance, John Sawyer, discusses the difference between a Merchant Cash Advance companies and Factoring Companies. In our
Owner of Construction Finance, John Sawyer, discusses the difference between a Merchant Cash Advance companies and Factoring Companies. In our earlier video we were talking about a Construction Finance client that was in a cash bind who needed a quick $100,000 to take on a big project that was above and beyond his financial scope. Watch the video below to learn the difference between an MCA and a Factor.
I hope you can relate to me. You are getting these phone calls saying, “You are pre approved for $100,000 in working capital. We don’t check credit, all we do it look at your bank statements. Call now, don’t you want to grow?” You may even be receiving them by robo phone calls. There are hundreds of these companies trying to push money onto small businesses to get a good rate of return. It sounds great, “sign up now and we’ll add $10,000, $50,000 or $100,000 to your bank account tomorrow. Then we will begin to ACH payments out of your account.” There may be situations where that is your only option. But at Construction Finance, we offer a different option for the construction industry and other service related industries.
Let me work you through the math. A person is needing extra capital for payroll, materials, labor, insurance premiums or whatever the need may be. Here is a tale of two fundings, they are totally different.
A merchant cash advance company may call you and tell you that you are pre qualified for a $10,000 advance added to your account today. Including a $30 wire fee, $150 documentation fee and possibly many more fees. But for the sake of the math, let’s say they put in a total $10,000 into your account. This is the story of one of our clients. He had taken the $10,000 unfortunately. The next day he begins having $100 ACH debited from his account daily for 130 days. So, you can do the math, he did get a quick fix today but in the end he paid $13,000 back BUT he paid an extra $3,000 in FEES! There may be cases in your business life where this is the only option but we want everyone to know that we offer an alternative method of funding. We can buy your receivables. A factor is just someone who buys an invoice for a small discount. Our discounts can be as low as 1.5%, 3% and possibly 4.5%.
So if Construction Finance had advanced $10,000 on a particular invoice, our rates would be approximately:
1.5% if that invoice paid in 15 days= $150
3.0% if that invoice paid in 30 days = $300
4.5% if that invoice paid in 45 day = $450
6.0% if that invoice paid in 60 days = $600
So, your eyes aren’t deceiving you. There really is a “0” difference. MCA = $3000 VS Construction Finance Factoring = $300
We are literally 1/10th the price of a quick cash merchant cash advance. If you have a MCA offer and are unsure about the details, call us and we will go over the contract and look for any hidden details that you may be missing.
September 25, 2016 Dia Sawyer
In the previous post, John Sawyer, owner of Construction Finance, shared about growing as a contractor or small business and experiencing
In the previous post, John Sawyer, owner of Construction Finance, shared about growing as a contractor or small business and experiencing the ‘best of times and the worst of times.’ Navigating how to keep the funding in place to keep the employees paid, vendors paid, subcontractors and suppliers paid. He talked about banks, working capital loans and selling invoices. Listen as he shares more detailed information about selling invoices.
Banks are very important. Use your bank for low interest, long term loans, to pay for real capital. Use banks to pay for buildings, a backhoe, trackhoe, crane or horizontal digging equipment. Any equipment that you can buy with any low interest bank loan.
What happens when you get that equipment bought and your crew has grown? Sometimes that bank line of credit is maxed out.
For instance, I had a client this week, a smart, smart client. He has a nice line of credit at the bank, about $150,000. However, he bills about $250,000 a month worth of business. He can cash flow that amount but overnight he was awarded another $100,000 contract on top of his normal $250,000 monthly business. He said, “I can’t go back to the bank and ask for an increase in a line of credit. This is a 45 day long job and they’ll never get it approved by then.”
This is a situation where Construction Finance and invoice factoring is the answer. He needed to factor his accounts receivable and Construction Finance can purchase invoices in the construction realm for 1.5%, 2%, 3% and sometimes 4%, depending on the project. So he was able to take that project and grow his gross and net revenues by selling his invoices and continue to keep his bank relationship strong.
While most contractors panic when they have that situation. $350,000 worth of cash flow problems. But as you can see, he doesn’t have $350,000 worth of cash flow problems, he only has $100,000 worth of cash flow problems. Construction Finance was able to purchase those invoices for that additional $100,000 worth of work that he does. We can purchase them at a rate of 1.5%, 2%, 3% or possible 4% depending on the particulars of the job.
So look at your projects, and before you panic with your line of credit or your working capital you’re using now, look at the amount that’s really putting you over your comfort level and consider selling those invoices to us at Construction Finance. Nothing will change. Your contracts don’t change, we don’t interfere with your relationship with your general contractor or your customer. We advance money on that invoice after work is completed and then we are the ones who wait to get paid from your customer.
September 24, 2016 Dia Sawyer
John Sawyer, owner of Construction Finance, begins the “What is Construction Factoring? Tutorial Series” with a little background. My dad
John Sawyer, owner of Construction Finance, begins the “What is Construction Factoring? Tutorial Series” with a little background.
My dad was an english teacher when I was growing up and made me read books. My kids today don’t read too many books unless they have to for school. They are too busy texting, instagraming, snapchatting, facebook and devouring so much online information. But my dad made me read books. Charles Dickens novel, “The Tale of Two Cities” starts out with, “It’s the best of times and it was the worst of times. I didn’t know what that meant when I read that but since I entered the construction business in about 1995, I learned what it meant. In about the year 2000, it was the best of times for my little construction company. I had about 15 full time carpenters, we had work, business was booming. But at the same time, it was the worst of times. I did not have the right cash flow for the tools, to keep all my employees paid, to keep all my vendors and suppliers paid on time. It was the worst of times when it came to cash flow and growing too quickly.
So what are your options? You can go to the bank. Often times that takes many weeks, perfect credit, and lots of approvals. You can say, “yes” to these hundred people who call you every day telling you that, “you’ve been pre approved for $100,000 of working capital. Sign up now and all you have to do is pay us back $1,000 a day forever.” But, there is another option, you can sell your invoices to a construction factor, such as Construction Finance, for a much more affordable rate than that $100,000 working capital that they offer you over the phone and force you to pay back $1,000 a day forever.
In my next video, I’ll go over the rates and how it works exactly to make it through those ‘worst of times and best of times’.
September 23, 2016 Dia Sawyer
Accounts receivable factoring, invoice factoring, factoring receivables and factoring are all the same. Construction factoring is the same as well.
Accounts receivable factoring, invoice factoring, factoring receivables and factoring are all the same. Construction factoring is the same as well. However, in construction factoring there are a few extra layers of paperwork that may make things a bit confusing if you’ve never factored a construction invoice.
John Sawyer, owner of Construction Finance, has put together a video tutorial series to help you understand the steps of construction invoice factoring. You will also realize that having a factoring company like Construction Finance will give you an extra layer of protection. Never leave another job site without being paid the entirety of your invoice.
Over the next few days, we will post each new video in the What is Construction Factoring series. If you just can’t wait to watch them all, check out our Youtube channel playlist and watch them all.
September 22, 2016 Dia Sawyer
A growing company means there will come a time when every sand and gravel contractors business will need more working
A growing company means there will come a time when every sand and gravel contractors business will need more working capital. Cash for things like making payroll, buying supplies or taking on bigger or new jobs. It can be challenging for sand and gravel contractors to wait the 45, 60 or more days for customers to pay their invoices. The economic climate over the last few years has made it hard for companies to get a bank line of credit. Finally, sand and gravel contractors have another option, accounts receivable factoring. Invoice Factoring can provide relief to your sand and gravel business by giving access to immediate working capital without your customers having to pay quicker than they normally would.
The Four Easy Steps to Accounts Receivable Factoring
Accounts receivable factoring can provide your business with a continuous source of operating capital, here is how construction factoring works at Construction Finance:
Benefits of working with a factoring company
If you go to a bank for a loan they will consider whether your company is financially sound. Factoring companies don’t look at the size of your business, how long you have been in business or your creditworthiness. In fact, factoring companies look at the creditworthiness of your customers. If your business has a creditworthy commercial customer base with unpaid invoices you can benefit from factoring.
Additional benefits of accounts receivable factoring:
The sand and gravel construction business owner does not incur any debt as they are “selling” the receivable as long as their customer pays the invoice.
You can to take advantage of early payment discounts from suppliers, as the factoring company will often pay your creditors right away.
You no longer need to offer early payment discounts because you are getting payment right away from the factoring company.
The factoring company will do due diligence on your customers, ensuring that they are credit worthy, so in turn giving you often free professional credit monitoring of your clients.
You can concentrate on growing your business instead of wasting your time worrying about when you are going to get paid.
Construction Invoice factoring may not be the first option you thought of when thinking of a cash solution for your sand and gravel construction business, but it can be the perfect solution to your working capital flow challenges. It can be just what you need to get the money for your sand and gravel construction business to make payroll, buy supplies, pay vendors and grow your business.