As a subcontractor, your reputation with general contractors is critical. In the interest of maintaining it – when it comes to project finances, you may choose to keep the details close to the vest. Especially if you’re interested in trying a non-traditional payment option, like material financing or factoring. The reigning perception in construction is that “cash is king.” If you’re using anything other than hard cash flow to fund labor, materials or equipment, you might worry about giving the impression that you have trouble paying vendors.
This flawed perception tends to cast an unjustified stigma on contractor financing in general, and at Billd, we’re ready to debunk it. There is no reason to feel uncomfortable revealing that you’re financing project materials, it’s actually something that your GC should love to hear – thanks to the ample benefits it has on the project. Ultimately, subs need to know that they don’t have to be apprehensive about “the way it will look” if they finance materials, rather than paying cash. Because at the end of the day, when you finance materials, you’re doing your GC, and yourself, a big favor.
There is no reason to feel uncomfortable revealing that you’re financing project materials, it’s actually something that your GC should love to hear
We’ll explore several reasons why your GC will be more than happy to see you financing materials, and the positive impact it has on the projects you’re working on:
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1. Ensures that Projects Stay on Schedule
When you’re on a commercial job, your schedule, material deliveries, and finances need to be tightly coordinated (with minimal lead times). If you accept 30-day terms from your supplier, knowing full-well that you may not be able to pay the invoice by then, you risk the supplier withholding any future material deliveries, throwing a wrench in the project timeline. This isn’t just irresponsible, it’s avoidable.
The smarter alternative? Finance your materials instead. This way, your supplier is paid cash upfront, and you guarantee that materials will be delivered reliably. Not only do material deliveries flow in, but you also have more time to pay for them. When you don’t finance materials and instead rely on unpredictable cash flow, you risk your ability to complete the job on time and your reputation with the GC.
Why It Matters To GCs:
You’re not the only who’s on the hook for making sure the job gets done on schedule. The GC is answering to the project owner, and when the project is running smoothly, materials are arriving on time and work is progressing according to schedule, the GC will have a satisfied customer. They, in turn, become your satisfied customer.
Not only do material deliveries flow in on time, but you also have more time to pay for them.
2. Reduces Your Risk of Losing the Project
Once again, let’s assume poor cash flow prevents you from paying your supplier on time and getting the materials you need to finish the job. It’s no surprise that the GC could terminate your contract and hire another sub to pick up where you left off. It’s the natural consequence of the scenario described above. If you fail to do the work on time, you won’t keep the job.
But when your material financing partner already took care of the project materials, you drastically minimize the potential of losing the project. GC’s put faith in their subs to take care of the project and manage their finances effectively. Material financing ensures you live up to that expectation, every time.
Why It Matters To GCs:
Replacing a sub halfway through a project isn’t just a tough break for the sub. It’s also a considerable inconvenience to the GC. Ideally, they want to avoid the stress of finding and vetting a replacement sub halfway through the project. It’s a labor intensive process and many quality contractors refuse to start projects that other subs started. All of this delays the project, and there’s often a difference in quality of work, which can mean expensive rework, change orders, and further delays. By protecting your place on the project, you’re helping the GC avoid extra work, stress, and potential delays.
3. You Become a Reliable Customer for Your Supplier
What supplier doesn’t want to work with a sub who pays cash in full on every purchase? Your material financing partner will front the payment to your supplier, so your supplier essentially eliminates any credit risk they otherwise would have taken on. Not to mention, with cash payments come cash discounts – which makes material financing one of the smartest ways for contractors to get a better deal on their project materials. When you have a strong history of paying for materials on time, there are a slew of other supplier benefits you can take advantage of. For example, they may be more willing to fulfill rush orders or come through on expedited deliveries.
Building a good relationship with your supplier is critical if you plan to grow your business and take on bigger or more projects.
Why It Matters To GCs:
When you have a good relationship with your supplier, you can rely on them to fulfill rush deliveries when needed. Lower material prices could also widen your profit margin or enable you to be more competitive with your bids, resulting in savings for the GC.
When You Use Material Financing, Everyone Wins
Simply put, everyone on the project benefits when subs leverage material financing. Suppliers gain an excellent customer. Subs are able to stay on the job, remain on schedule, and focus on doing quality work. GCs look good in the eyes of the project owner, avoiding financial and logistical headaches.
All things considered, no subcontractor should feel antsy to disclose that they’re financing materials. Armed with a better understanding of the benefits, they can feel comfortable and confident in that they made a shrewd decision – one that will help them grow their business and keep their reputations on the up and up.