Construction
General Contractors and Subcontractors
As in any business, a spike in sales has a growing accounts receivables position to go along with it. It’s particularly tricky in construction because of all the progress billings that goes on – from subs to GC’s and GC’s up to the architects and developers. Work has to be verified each step of the way with estoppel letters, AIA forms and WIP statements to create valid claims for payment. And even then there are times when everything checks out but the developer doesn’t pay the architect on time or as expected. That creates a ripple effect descending from the architect to the GC, from the GC to the subs, and from the subs down to the subs of subs. And if the subs aren’t paid they can’t make payroll and that stops the project.
The factors specializing in construction will want to see upfront your Work-In-Progress (“WIP”) statement. It shows you’re on course – on time – and on budget with your current projects. It also shows you’re operating within the AIA framework, turning in all required paperwork and documenting change orders. Anyone with bid, performance or payment bonds knows WIPs intimately. You can’t get a bond without one and they must be updated constantly. Otherwise, no WIP means no bond, and no bond trips into an event of default for the developer and reason enough to stop paying.
And attention all you subs – with or without performance bonds – you need WIPS too. Reason: factors look at you through the same lens as they do a GC. Why? WIP gives them a snapshot of your company you can’t get any other way. WIP shows how you managed change orders, how much of the job went over budget as a result, and overall how good you are at bidding jobs correctly. The better you are at bidding the fewer change orders there’ll be. That’s what a factor wants to see. They know change orders happen all the time. They want to see – on the WIP – how good you are at absorbing them. If you don’t know how to create a WIP I’ll show you!
Attention - GCs! Get the subs off your back! Give me a list – I’ll offer them what I’m offering you. We’ll factor their stuff and hold on to it until you pay! We know how subs like to stay involved with collections and will accommodate them.