A financial capability letter shows your GC that you have the capital to do the project right. Financial capability letters are an important X-factor when bidding on government contracts, but they should be part of every bid you submit as a component of your capability statement. After all, one of the largest concerns a General Contractor has when hiring a subcontractor is whether they have the ability to finance the work that needs to be done before the first payment. A financial capability letter in your capability statement delivers the right message to the GC.
What is a capability statement?
A capability statement is a document included in your bid package to show the General Contractor why they should consider you for the project. The capability statement is much like a personal resume. It shows who your company is, your relevant experience, and differentiators that set you apart from the competition.
When should you send a capability statement?
Many government agencies will require capability statements from contractors as part of the bidding process. Consider the extensive bidding process for government jobs as the gold standard of bidding. Why not go for gold with every bid?
Making a capability statement part of your regular bidding process will give your company a competitive advantage, showcasing the skills and experience of your team and also your commitment to the performance of your team.
What to include in your capability statement?
Remember that your capability statement is much like a professional resume for your business. It needs to SHOW the General Contractor who you are, not just list previous jobs. At a minimum, your capability statement should include:
- An introduction and basic overview of your company
- Share what your company is all about and what you are most proud of
- If they hire you tell them what they can expect from you and your Company every day on that job site / project
- Contact information
- Core competencies
- Your business’s differentiators – Why you?
- Specific experience that relates to the project
- References from General Contractors or clients
Remember, the capability statement is telling a story. Your company is the hero. You are showing the GC that choosing your team is the right decision for this project. Keep it relevant, engaging, and concise.
Include a financial capability letter
Construction has a lot of upfront expenses at the beginning of a project. Those costs — payroll, material orders, equipment, etc. — are almost always handled by the subcontractors on the job. Having sufficient cash flow in place is critical.
Your GC knows this. They’ve seen projects suddenly experience delays because subcontractors can’t afford labor or materials. These delays impact everyone on the job.
Put your GC at ease by showing your numbers in your bid — how much it is really going to take do the job and how you plan to cover those costs. The financial capability letter verifies the “how.” Often in the form of a loan pre-approval letter, a financial capability letter shows that your company’s financial standing has been verified.
If you are not using third-party financing, your bank or CPA should be able to provide a financial capability statement. If you are using third-party financing, your lender will provide one.
Nervous about revealing that you are using financing? We get it. Consider this: The owner or developer has a financing partner. The General Contractor probably does, too. Business, especially construction, requires a lot of upfront cash and long cash flow cycles. It’s normal to need financing. It’s SMART to use financing.
Very few people think the job is being financed with cash in the bank; make your customer comfortable by telling them how you do it. Own the fact that you have a finance partner and that having a good one is how you are able to perform.
Capability statements and financial capability letters may sound like a lot of extra work, but they can be the differentiator that makes all the difference. Invest in creating a capability statement that makes your bid stand apart from the competition, that showcases your ability to perform, and that ensures you have a plan to cover the costs of getting the job done.
Like what you just read? Subscribe to our newsletter.
