Few commercial contractors have the luxury of paying the full up-front cost of a project without help along the way. But often, they wait too long to seek that additional funding, which can put unneeded stress on the project itself or even the business overall.
Due in part to the Great Recession a decade ago, most general contractors have done away with the practice of making upfront payments to their subcontractors. As a result, subs will be on the job site for 30 or 60 days before they can submit a pay app for that work, and then it could be another 30 or 60 days before they receive that payment. Throughout that time, they still need to make payroll, cover material costs, equipment and insurance.
Most contractors need additional funding, but where can they get it? Many lenders, from banks to factoring companies, will not issue funds even to well-qualified or established businesses until they have an actual approved pay app or receivable. Unfortunately, by that point those businesses often find their project cash flow already stressed.
You don’t need to wait that long for the capital you need. Late payments to vendors or supply houses (and late payment fees) may not be necessary after all.
When should you start looking for funding?
Consider the cost and method of any needed capital during the bidding process of a job. Often, owners wait until after a job has been awarded and then scramble to find funding when it’s most needed, which can limit their options and force them to take out a more expensive loan. That scramble can be avoided. No matter what type of lender you plan to use, it’s always wise to identify the amount and cost of a loan so that it can be built into your bid price.
The Mobilization Funding difference
Mobilization Funding, LLC goes a full step further. We talk to many of our clients even before they bid on a job and provide a straightforward breakdown of the cost of the loan, catered specifically to the project they are considering so that it can be built into their job costs. The funds are issued upon the start of a project, or at the time they are needed by the borrower. The repayment schedule is then organized according to the project’s payment schedule. In other words, the loan schedule is designed so that the business can repay the loan with the payments they are receiving from the general contractor through the normal schedule and process.
Mobilization Capital, also known as Mobilization Funding, is a type of loan that can help you avoid stretching your resources too thin in those first several months of a project. It’s a unique loan option offered by a small number of lenders. You can learn more by checking out our page, About Construction Loans, or contact us to get started.