How Construction Companies Take on Bigger Jobs With Financing

Do you struggle with affording expensive materials upfront when you haven’t been paid from previous jobs? In this webinar, we’ll discuss the challenges and opportunities you have as a contractor to protect and grow your business through financing materials. 

Learn about

• Why payment problems are such an issue in the construction industry
• Proactive advice from a construction financing expert on how to keep your business  protected and growing
• Real world examples of how financing can help

Transcript

Carah Vallejo (00:07):
Thank you to everybody for coming to this webinar today. We’re so happy that you’re here. We’re going to talk a little bit about how construction companies can take on bigger jobs and grow their businesses with financing. And we are going to dive right in if that’s okay with you guys. Our speakers today are rain Martin, our construction financing expert here at Levelset. Hey rain.

Rane Martin (03:08):
Hey, how was everybody?

Carah Vallejo (03:11):
Awesome. Adam says he’s doing pretty good for Thursday.

Rane Martin (03:15):
Gotta love it. Love it.

Carah Vallejo (03:17):
We also have Andrew Dunn, our vice president of financial products. How you doing today, Andrew? Awesome. Andrew, do you want to tell us a little bit about Levelset?

Andrew Dunn (03:27):
Sure. Thanks Karen. Good afternoon. Welcome to everybody. So many of you may be familiar with Levelset, but those who aren’t, uh, what we do is we’ve we help thousands of contractors and suppliers protect and speed up construction payment. We help you send payment paperwork electronically. We help you find accurate project details, and we alert you when you see we, when we see payment problems on one of your projects. And when we want to make sure that you all have cash to grow your business. And that’s what we want to talk about today.

Carah Vallejo (03:55):
Awesome. Thank you so much. All right. So these are the, some of the questions that we’re going to answer today. First, we’re gonna talk about why positive cashflow is so hard to achieve and maintain. Uh, we’re going to talk about why financing is a viable solution to that problem. And we’re also going to share some warm and fuzzy success stories about how that worked for other construction companies. And then we’re going to have time for questions and answers. Um, I do encourage you to ask your questions in real time, throw them in the chat and we’ll get to as many as we can. So throw them in there at any point. And we’ll either salt and pepper men throughout the webinar, or we’ll get to them at the end, during that question and answer section. All righty. So our first question today is why is positive cashflow so hard to accomplish Andrew? Do you want to tell us a little bit about that?

Andrew Dunn (04:44):
Sure. The contractors that we talked to and that we work with, they’re getting squeezed from every angle. Construction is one of the slowest paying industries, 84 days on average, but the people that you need to make payments to your crew, your material, suppliers, even your subs, they don’t want to wait 84 days. Can you imagine, can you imagine if you install an HVAC system on a property, on a new building, and as you’re finishing up for today a day, you turn to your crew and say, Hey, y’all great work. We’ll send you a paycheck in 90 days that wouldn’t work. You would lose your crew. You wouldn’t have a crew anymore, but this is what happens to contractors. They all have this squeeze and we see the squeeze every day and we talked to customers and face the squeeze and it makes cash flow very challenging.

Rane Martin (05:26):
That’s I mean, that’s really a great point. Uh, Andrew that’s a, you know, people are inclined to kind of take care of their own interests and you know, those GCs, the homeowners, the developers, whoever it is, that’s running those jobs. That’s, uh, that you’re doing the work for, they’re going to be taking care of themselves at the end of the day. And that’s why it makes it so difficult to manage the cashflow as a contractor. You, I mean, in all honesty, you kind of have the odds stacked against you. The deck is stacked against you because you have to do the work to get paid. And sometimes you’re having to provide that money up front that that’s just not always feasible. It doesn’t always work that way to where, uh, that’s gonna always work the best out for you. So I don’t know. I think we’ve lost maybe care just for a second.

Andrew Dunn (06:14):
Um, when, when she comes back, we’ll do the deck, I’ll tee you up. I’ll tee up the next question for you, reign and why is financing jobs upfront a solution to this cashflow problem?

Rane Martin (06:25):
You know, uh, really financing jobs upfront. And it allows us to create a cashflow top of mind, puts cashflow top of mine. And that’s really the most important thing for businesses every single day. If you have cashflow, you can do more as your business, you can teach more cash into the business on a day-to-day basis and make sure that you’re there to cover, you know, your labor cost, your, uh, day-to-day expenses, your rent, your mortgage, your, uh, emergency expenses that can come up. You want to be able to cover all those. And that’s a, that’s my financing helps. It keeps that task flow top of mind, and it enables your business continue to grow.

Andrew Dunn (07:02):
Yeah. And I’ll, I’ll add to that is that when you look at the, the suite of financing tools available to you, so there’s, there’s factoring there’s lines of credit, there’s working capital loans. You could, you could throw these payments on a credit card. And when we started talking to contractors, one of the things we quickly got to was helping them, helping them think about how to finance projects upfront, basically, because that’s when you face the cash crunch, right? So for many contractors that the start of a job, they have to go pay for materials. The job is barely started their crews and so’s money, and might not even be on the job site yet, but they’re already starting out in their own money for materials. And so it makes us, it makes us very tricky game. You have to pay. And so financing upfront is one of the tools we found to be most helpful to contractors.

Rane Martin (07:50):
Yeah. And, you know, I kind of, like you mentioned, there are other options out there there’s a, you know, factoring, which involves, you know, taking your invoice and that factoring company would, uh, you know, basically pay you out a certain percentage of that invoice somewhere around 80 to 85%. Uh, but that’s, they like to have more control over a larger base and not just individual invoices. So that’s a, that’s kind of where that can come into an advantage. Disadvantage. You probably want to use them just for one or two one-offs, but it doesn’t always work that way. Uh, and let’s speak to, into credit cards and credit cards. Yeah, it’s great. You can get points, you can do what you need to do, but, uh, but at the end of the day, I I’ve always preached that. You’d never want to put something on a credit card that you don’t know when you’re going to be able to pay it off. And, uh, my steadfast rule is don’t put it on there unless I can pay it in 30 days. And, uh, with these jobs, if you’re putting materials on there, you don’t know that you’re going to be able to pay those off 30 days or 45 days or 83 days. And then you’re just accumulating interest that’s out there. Uh, this, you know, with financing, you’re financing specifically for your project, for your materials and you know exactly what you’re paying for, you know, your terms, you know, how long you can pay it off. So

Carah Vallejo (09:04):
Awesome. So I do apologize. I was having some technical difficulties, um, on, on my end. Hope everybody out there is doing okay. Uh, awesome. So, um, we, I missed a little bit, but we talked about, uh, why we did we, did we go ahead and cover why, um, financing is good for, okay. Excellent. Thank you guys so much. I apologize. Um, now we want to talk about some success stories from real construction companies and Andrew, I know you had some really great examples for us on this one.

Andrew Dunn (09:38):
Sure. One of my favorite examples of somebody who had a success story with financing, their materials upfront is this company out of Miami that does custom millwork for a lot of hotels and condos, that kind of thing down in Miami. So what they do is they purchase raw materials often with cash, and then they have to measure, cut, assemble, and install. All of this. This whole process takes a really long time and materials financing has helped breathe new life into their business. They found us four months ago, and now I’ve already done 10 jobs with us. Now they’ve aligned the way they pay for materials with the way they get paid. We remove the upfront stress for them, and they know they have a partner in us and helping them pay for materials,

Rane Martin (10:21):
You know, and, uh, to kind of piggyback off that I’ll throw out kind of a different scenario for us. There. We have a company in the Northeast that, uh, has been able to successfully use this as well, but it was, uh, six months. He’s only been in business six months. And so he thought he was going to be starting small, taking small projects and just slowly building up as business. However, life had other plans. And, uh, those other plans included him winning a bunch of jobs that he did not expect to win at this point in time in his, uh, in his business growth. So he, uh, he had all these opportunities to do these jobs, but didn’t know where the cash was going to come from to be able to fund the materials for them. And to start that process moving forward. And as options were limited, after being only open for six months, it’s not like he can go to the bank.

Rane Martin (11:05):
He can’t go to the suppliers that he hasn’t had a relationship with and ask for different terms. He, he needed an option and he needed something that could really help him. So we were able to help him get those first few projects done. He’s got, uh, he’s won three more projects that are coming over the next couple of months that we’re, we’re going to be helping them with. And that’s, he wouldn’t have been able to do that, uh, without having the option to finance those materials up front. So that’s kind of a, it’s a little bit of a different direction, but that’s, that’s one that we were able to, uh, help out as well and see, see really benefit from this.

Carah Vallejo (11:40):
That’s awesome. I think both of those stories are really great and really speak to, um, why it’s important to not only look at all of the options that you have, um, as a business owner in the construction industry. Um, but why financing is a great option among those. Um, so again, I apologize, I miss some of the stuff in the beginning, um, but I would love to open it up to a few questions. Does anybody have any questions? Um, but you know, burning a hole in their pocket. Um, my chat also went down. So if there were any questions that came into the chat, I can’t see them. So pop them back in there or, um, rain and Andrew, if you see any in the chat that you want to tackle, um, let’s, let’s take a look real quick.

Carah Vallejo (12:28):
Okay. Well, I’m going to ask a question and this may have been answered previously, so just tell me if it already has, um, you know, but when we’re talking about financing a project and the options that you have, um, surrounding financing, you know, what, what are some of the top options that are out there? So there’s financing, there’s what, uh, taking out a line of credit or putting it on a credit card. I know I heard the, the, the tail end of that. I love that rule of thumb as well, reign where if you can’t pay it off in 30 days, it doesn’t belong on there. Um, so I think that’s great. What were some of the other top ones that we discussed?

Andrew Dunn (13:04):
So the, so what we see out there is we have some people doing, um, factoring, factoring and invoices, right? Factoring is a very based base of process. A factory is going to come in and, and really do a deep dive in, into your business. It’s hard to shake off a factor. Um, there’s, there’s lines of credit for a bank, right? But, um, you know, many banks don’t like to lend to construction, uh, if maybe hard to be approved by a bank there’s there’s credit cards, right? That’s another way that you can finance a business, but that’s just increasing your debt. There’s out, there’s working capital type loans, which, which from banks, um, which is similar lines of credits, but also have their challenges. So those are sort of the, the S the S the suite of options that we see. One reason that we like materials financing is that, Hey, it’s a little bit easier to underwrite.

Andrew Dunn (13:52):
The approval process is a lot simpler compared to some of those others. If you came and did materials financing with us, you’d see that it’s a, it’s a very quick process. We can usually turn you around and in as little as a day, when reviewing your project, reviewing your history and that kind of thing, um, we also like it because we help align the way you purchase materials with the way you get paid. Right? So if you put, if you’re financing something upfront or say you putting those materials on the credit card, right, that’s going into your credit card limit, and that credit card bill is going to be due, or are you going to be paying lots of interest on it in 60 days? The way we’ve set things up, the way things get set up with materials financing, is that the way you pay for materials matches the way you get paid on your jobs. So you, you pay for materials when you get repaid instead of having to do it upfront. And that could be a game changer for you. If you’re trying to grow your business, take on more jobs or take on bigger jobs.

Carah Vallejo (14:46):
Yeah, absolutely. And thank you for reiterating that for me. Um, something else that I think, you know, I know we have a couple of current customers on this call and how does, uh, financing your materials, you know, work with some of the other things that Levelset offers like Arlene rights management, um, and our legal guard offering, you know, do you feel like that toolkit all kind of works together and protecting and growing businesses, Mr. Both reign or,

Rane Martin (15:14):
You know, I, I do think it goes hand in hand, I think, uh, whenever you equip your business and you equip yourself with the ability to, uh, cover yourself no matter what comes up and know, and protect yourself going forward, I think that that’s really the goal of your businesses to grow, but also protecting yourself along the way. And that’s what Levelset as a whole does. We, we, we are try to protect, Levelset tries to protect the customer and our clients and trying to make sure that they are, uh, have every tool at their disposal, all the research, uh, to possibly be needed and, uh, the ability to, uh, to move forward in a confident way.

Carah Vallejo (15:51):
Awesome. I love that. Well, it looks like we got a couple of questions rolling in, um, from Stephanie Bell, she says, what if you had a bad credit score and have only been in business for about seven months, what would, what advice can we give?

Rane Martin (16:05):
So credit’s not the end all be all for us. Uh, credit is, uh, obviously credit’s always a factor, however, it’s not the end all be all. We, we, we have a large, we have a robust, uh, underwriting, uh, system that we operate off of. And a lot of it is lean rights-based more so than credit-based. So we look at project specific, uh, underwriting. Uh, whenever we look at credit, it’s really just from a soft view perspective. We’re not diving in doing a deep dive, trying to, you know, uh, get in deep in there and trying to figure out what all’s happened in your past. We’re just getting an overview to know, you know, made sure everything looks okay and that we can continue for, but really we’re looking at projects and we’re looking at the lien rights on those jobs. And, uh, so no bad credit would not disqualify at all. And, uh, only being in business seven months, that’s, uh, we’re, we’re here to help that that’s something that can be helped. Uh, for example, the customer that I use, he’s only been in business six months and, uh, he’s been able to do a few jobs already. So when he’s, he’s really thriving from that as well.

Carah Vallejo (17:12):
Awesome. Um, we’ve got a couple of questions here and, uh, one of which is, you know, can you you’re welcome, Stephanie. Um, can you only finance materials, for example, um, this person works for a sub with no upfront material costs. Um, their expense is payroll. What do we have to say about that, Andrew?

Andrew Dunn (17:32):
Yeah. P P P payroll is a challenging one, right? Like you, you, you got to pay your crew if you want them to show up. Um, currently currently a Levelset, we help, um, with materials financing that said, we see a lot of people that need, um, payroll financing. They tend to go toward factoring. In fact, factoring, um, you know, staffing agencies are big, customers are factor. Um, that said, um, we’d love to talk to you about your specific situation, um, because there, there may be some alternatives that, um, that, that we can work out with you, or at least help you connect, can connect you to one of our partners who may be able to help with one of your, with your situation.

Rane Martin (18:11):
And there is another client that I have heard of out there that, uh, they, uh, instead of they just kind of adjusted how they handled their finances and how they approach that on our regular basis. So instead of fronting a ton of the material costs, or, you know, paying for that upfront, they substituted that with the materials financing so that they could come back and take care of the payroll on the immediate while waiting for the money to come in on that project. So it was basically just kind of adjusting how they looked at their day-to-day finances and in the job, and they, uh, kind of slid payroll up to the cash flow portion. And then that put materials on the financing portion. So

Carah Vallejo (18:49):
Love that keep your cash, right. Um, and so we have another one here and just, you know, getting a little bit more information regarding materials financing from Andrew. Um, you know, it says here, it’s very difficult to finance these jobs when you’re waiting months and months to get paid back. And we definitely understand that struggle.

Andrew Dunn (19:07):
Yeah, Bob, the way, the way we’ve structured materials financing is around 120 days, four months to pay, right? We really want to align the way you pay for materials with the way that you get paid. It’s the squeeze, right? You’ve got your material supplier saying, I want to be paid upfront, or I want to be paid in 30 days, but you’re not getting paid for 90 days, 120 days. I refer to it as paying chicken with payments, right? The suppliers they give you 30 day term. They know you’re not going to get paid within 30 days. And you got to spend 30 days to go scramble and find the cash to cover that. While you wait to get paid from the GC or the owner, we want to help you get rid of that. We’re going to give you 120 day payment terms where you could pay us in 120 days, or when you get paid from your GC, whichever happens sooner. Uh, and we’re going to work with you. We’re going to work with you so that, um, you know, the financing doesn’t start until the, the materials hit, hit the ground and you start work. There, there are ways that we can work with you to make this cash stress go away so that you can focus on, on building. That’s what we want you to focus on. We want you to focus on building. We want you to focus on taking bigger jobs and more jobs and not stress. And where are you going to get cash?

Carah Vallejo (20:16):
Yeah, absolutely. Um, thank you so much. And, and Bob, I do hope that answered your question. If it didn’t pop something else into the chat and we can definitely address it. Um, something that I would love to ask the participants is, you know, if there’s something that we didn’t cover here, what else would you like for us to have a webinar about, or, um, maybe send out some content about we are here as a resource and we are here to help you. And we want to be sure that the information we’re giving you is exactly what looking for. Um, so if there is anything that is a burning question that you would love for us to talk about, definitely pop that in the chat. Um, and Bob awesome. So he wants to know how to reach out after this meeting. That is a perfect segue here.

Carah Vallejo (21:01):
Um, we do have rain’s contact information, uh, here for any questions that you may have about financing. In addition, um, this entire deck will be emailed to you tomorrow, along with the recording of this webinar. So whether it’s Andrew, whether it’s rain, um, whoever you’re interested in gathering information from their contact information is in here. Um, and you guys will have a chance to connect on that end. So as we kind of, you know, perfect, there you go. Um, and so again, as we kind of wind down on this webinar, I’m, if there’s anything that we didn’t cover, that you would have liked for us to, or you have a burning question, pop that in the chat, or send an email to reign or Andrew. Um, we’re so grateful for everyone taking time out of their day to come to this webinar. Again, we want to be a resource and we want to be those that are empowering you to feel like you can get paid and you can do it quickly, and you can keep your cash and finance your materials. Um, there’s a lot that we can help you with. So thank you to everyone who came out today, rain. Andrew, do you have any parting words of wisdom?

Andrew Dunn (22:05):
Thank you. All reach out. If there’s any way we can help you, we wanna help you grow.

Carah Vallejo (22:09):
That’s right.

Rane Martin (22:10):
I’ll echo those same sentiments. So it was a, it was an honor to be here with everybody and hope y’all are all going to be able to have a great day. So,

Carah Vallejo (22:18):
All right. Thanks for coming everyone.