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How Financing Can Grow Your Construction Business

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There are essentially two ways to grow a successful construction company: taking on more projects or taking on bigger projects.

But it’s really hard to do either successfully without the cash to buy the materials and get started.

Watch a free webinar to hear Senior Payment Experts Paige Centa and Pierson Villarrubia share how financing can grow your construction business.

Watch to hear:

  • How to escape the growth-blocking effects of slow paying customers and rising materials costs
  • Why materials financing is less risky than other financing options
  • How Levelset can help you get cash up front to take on more and bigger projects

Earn a certificate that can be shared on LinkedIn by watching the recording of all three parts of the Construction Business Growth Series and taking this quick quiz.

Part one: 9 Tips To Grow Your Construction Business in 2022

Part two: How Financing Can Grow Your Construction Business

Part three: Three Steps to Avoid Growth Killing Cash Flow Problems on Construction Jobs

Speaker 1 (00:03):
Thank you so much, everybody for joining us today, this is a topic that gets all of us fired up, and we’re really excited to talk about it. As you can see, and as you know, because you signed up for this, we’re talking about how to grow your business with financing. This is part of our construction growth series. So there was a webinar before this, there will be another one after this. If you’re interested in hearing more about those shoot me an email or pop it into the chat. I can give you more information. And now I will let our amazing post for the day. Our speakers talk a little bit about themselves Pearson. You wanna go first?

Speaker 2 (00:37):
Yes. Hey everybody. Pearson Villa, Ruby construction for financing expert. I I worked as a global voltage intellectual contractor for a few years. Then I’ve been at level set for years working with rights management for subcontractor suppliers across the us, and recently a big part of the materials financing team where we help contractors get direct access to cash when they need it.

Speaker 1 (01:02):
Awesome

Speaker 3 (01:02):
Guys. My name is Paige send. I am a construction payment expert here at level set. I’m in Austin, Texas. So really a high level. My job here is to help contractors get paid fairly.

Speaker 1 (01:16):
Oh, that was so lovely and concise. Both of you. That was fantastic. Thank you. We’re I, again, we’re so happy to have everyone here. My name is Kara, and then we have Pearson and Paige. If you have any questions throughout this webinar, please put them in the chat, utilize it. Pearson and Paige are both here today to answer your questions, to be here as a resource. So definitely utilize that as we go through. Again, this webinar is put on by level set. We offer or lean rights management con construction, legal assistance, as well as material financing. We’re hosting this particular webinar to empower people, to get what they earn. Yes. to also keep positive cash flow and protect their business. So if you’re interested in any of these other things, head over to level set.com, again, we can answer any questions you may have in real time. But level set.com is a huge resource to anyone in the construction industry. When you guys say we get started, y’all ready. So wait. Okay. So diving right in what I really want to know the burning question of the day. Why is it actually so hard to stay cash positive and have a positive cash flow in the construction industry? What’s going on?

Speaker 2 (02:31):
Massive question. Massive answer, but I’m gonna try to dial it in a little bit. So, you know, everyone says, you know, the work is, is easy. The building, the construction, your specific trade, the that’s not the case. Like you still need to be an expert in what you’re doing, but that might be where you take pride in. But I think it’s cuz the system is set up kind of against a lot of newer contractors and subs to where subcontractors essentially finance all the projects across the us for new construction or any construction to where they have to get all their suppliers, you know, CD net terms while also getting that first draw at day 60, or maybe getting slow pay by someone until day 45, 60, 75, that just naturally creates a tough position for a contractor to be in where you’re not synced up between when your cash goes out for materials and when your cash comes in for the work that you’ve been paid. So that leads to that constant juggling act of what is my working capital, what is my operating cash flow look like? And how can I have enough, like on hand to be able to have the next job, the next job and the next so I think it’s just the way that the board is tilted against you and we’re gonna dig more into how we can get around that.

Speaker 3 (03:56):
Yeah. And I think to expand on that a little bit well all of that is true, right? We know that contractors like there’s millions of reasons we could go on forever about all the different things that could get in the way, slow down payment, this reason, the other reason. But beyond that, right, contractors have a lot of hoops to jump through and there are so many different variables that if you miss a step you’re at the end of the line and oftentimes the paperwork side, isn’t where contractors are putting their utmost attention, right? Like who, who likes that part of the job, we can just call that out. And so that’s, what’d you say

Speaker 1 (04:33):
Paperwork’s the worst.

Speaker 3 (04:35):
Yeah. And so there’s just so many intricacies and variables that are essentially, you know, favor well to the people at the very top, making it difficult for businesses to protect themselves. And so that’s really, you know, why, when we talk about having a repeatable process, something that you can control the controllables and do your part every time to make sure that, you know, you’re doing what you can to get paid as expected.

Speaker 2 (05:01):
Yeah. Completely agree. The I, repeatable process is huge, cuz same, the less variation you have, the less corner cases, the more that you have uniform cashflow and to grow, obviously that’s what you want. You don’t want to take big jumps at a time. You want to be steady, right. Tortoise in a hair. And then also you mid you like how it really benefits the people at the top. And I think that goes back to what I’m mentioning, where the board is just kind of stacked against smaller folks to where they have you on that leash where you’re gonna be waiting to get paid, but you’ve gotta, you’ve gotta pay out. So you’re using your own money to purchase materials, which you’re then getting reimbursed for later on. So that was, that was beautiful Paige. So yeah. Completely agree.

Speaker 1 (05:49):
Yes it is. It’s a struggle. It’s a struggle from beginning to end. And one of the things that we do here at level set is we empower people and we want to make sure that everyone feels empowered to not only get what they earn, but to grow their business. Right. This isn’t just a, a one step thing we want to help you grow your business in, in every possible way. And so today we’re just highlighting one of those things. And it’s also relatively new. And so a lot of details that go into it. There’s a lot of things that we wanna talk about. So I’m ready to move on. You guys. Good. Everybody else out there, we ready. Let’s do it. We

Speaker 3 (06:26):
Missed one from the attendees that you guys are just thinking, how did they not say this as a reason? Why it’s hard, please throw it in the chat. We’re always open. Yeah. Call it out.

Speaker 1 (06:34):
Yes. Yes please. We’re we’re also here to learn. We we’re experts in what we do and you all are experts in what you do and, and we want this to be a two way street. Very much so great. Call out Paige. Okay. So next up, why is financing an impactful solution to this larger cashflow problem? Right? It’s not the only solution, but it is a pretty darn good. So I would love to hear from you too, about why that is the case.

Speaker 2 (07:03):
Definitely. So I mean, there’s, there’s plenty of different ways to get financing, to have cash put into the business. You know, you can have a line of credit with a bank that you work with. It could be the credit line that your suppliers give you in a way. Acting is another example and they all have their own process to go through where, Hey, maybe a bank’s not gonna work with certain smaller contractors under a certain size. Maybe factoring is too involved to get into your business for you to want to hand over the keys that much. And for another thing with like credit lines with suppliers, maybe you’re a new business and they don’t want to extend you credit until, you know, you’ve done a certain dollar amount with them over the course of the year that keeps you stuck in that Sage where, Hey, I kind of need the opportunity to show you.

Speaker 2 (07:51):
I can do that before I can do it. So what we are doing with the materials financing is bridging that gap that I mentioned earlier with when you’re paid for your work and when you need to pay for your materials. And what that’s allowing contractors to do is one take on larger projects. If they don’t have the cash up front that they need for materials. But it can also make their bids more, more powerful. So, you know, let’s, you’re, you’re bidding and you have a certain deposit amount required that way you can cover materials. Maybe you can lower that a little bit because you know, you’re gonna have access to cash to cover that. But really it’s just bridging that gap to where money goes out when money comes in and I’m gonna pause there cuz there’s, I could just go on forever about what that can do for the business. But I have a feeling like Paige has something to add or something to call out on my end.

Speaker 3 (08:46):
Yeah. I think that, you know, when we think about specifically like financing in terms of moving money along, right. One thing that stands out to me from what you said there as well is like, think about the relationship with the supplier. We know we all know how it feels to be waiting on someone, to pay you and calling them this, excuse that excuse. I talk to so many contractors where when they aren’t paid on time, their biggest frustration is that they’re now putting their so supplier who they really value their relationship with in that same position. No one likes to do that to someone, especially someone you wanna continue to work with. And so I think that that’s been one of the biggest impacts that I’ve seen people talking about is really being able to protect that relationship and keep it in a great spot.

Speaker 2 (09:33):
Definitely.

Speaker 3 (09:35):
I think I call out like a little bit on the opposite side. You know, sometimes people tell me that they like when their supplier isn’t paid because their supplier then is taking action, you know, maybe sending notices or trying to protect their rights to the GC or the property owner. Which I always find that so interesting because now we’re waiting for someone else a little bit to speak up for us or be an advocate for our payment. Whereas like one of the things is, you know, when we finance, we now take a stake in making sure that everyone on that project is paid and best practices and leveraging payment rights works best when everyone is sending the same message and in line with their communication. I mean the worst too, I’ve seen this happen more times than I’d like to admit right where the supplier sends a notice and the supplier gets paid directly, but then the contractor is still sitting there waiting

Speaker 2 (10:33):
And then they’ve got nothing to grab onto.

Speaker 3 (10:35):
Exactly.

Speaker 2 (10:35):
Yeah. I’m gonna, I’m gonna hit like all three of those in a row to where like great things to mention cuz with the relationship, what we’re doing with the financing is we’re directly purchasing materials for contractors. So we are paying those vendors on day one right away, and then we’re turning around and we’re giving you pay when paid up to 120 day terms that way. Again, those dates sync up for paying when you’ve been paid for your work. So with the relationship, I mean, I don’t know how much better can be where a supplier is saying, oh wait, we don’t need to extend terms to you guys. You’re essentially making cash purchases from us. That’s a great way to become one of their best customers, someone that they’re gonna want to do more business with. And then a supplier’s job is not just to get the materials on site, but their job is also to help contractors grow.

Speaker 2 (11:32):
So this is gonna encourage them to say, let’s, let’s put some more weight behind these guys. When you talk about how, you know, contractors will rely on suppliers to go collect for them, great point, cuz like it happens, but does it mean it’s the best way to go about it or you’re relying on someone else to do it? When we are doing the financing on our end, we basically assume the lie rights that that supplier would’ve had for those materials. So now we are the people that have a vested interest in, in you getting paid to where now we’re not bound by, Hey, you hit day 45, we’re firing out a demand letter right now we have a lot more wiggle room, cuz we’re very comfortable with how to protect lean rights, how to manage lean rights. Cause that’s what we’ve been doing for decade plus to where you’re not, you’re not too worried about your customer and then you also have faith that we’re gonna be acting in your best interest like walking step and step and unison with, for you to make sure you’re paid when you should be.

Speaker 2 (12:36):
So I know I rambled a lot there, but yeah, that, that set off like a lot of buttons in my head.

Speaker 1 (12:42):
I, I thought it was great. And you know, one, one thing that I would love to hear you expand a little bit more on is this phrase that we sometimes talk about like lean back to financing. And I know that you mentioned, you know, this is what we’ve done for so long because we’re experts in lean rights and these things, but what does it really mean to partner with someone like level set? That’s not a bank, that’s not a credit card. Like we are, we eat live and breathe the construction industry and we are offering this lean back financing. Does that mean to a contractor that say starting their business? How, what, how is that gonna benefit them?

Speaker 2 (13:20):
Gotcha. So we’re, we’re protecting the money that we put out there. The same way a traditional material supplier would by using lean rights to secure those materials. Now a traditional lender, a factoring company, they rely very heavily on someone’s credit, worthiness financial statements or certain benchmarks that if you don’t even come close to it, you’re not getting looked at in the first place. So with what we are doing, we’re approaching it to where, Hey, does the project itself look good? Do we have strong, intact lie rights is the GC reputable is the property owner project owner reputable. If we can check those boxes, that gives us a really good feeling to where, Hey, we can put money out there for this person, even if they don’t have an extensive credit history or on the flip side, people that have a great credit history and they’re working with their bank already.

Speaker 2 (14:17):
They’ve got a line of credit there. They’ll use this as a way to extend that line of credit that they already have. So that’s reserved for other investments back into the business, buying more trucks for the fleet hiring more employees and use this to cover material costs. So that $5 million line, $10 million line credit is now a 12, $13 million line. So those are the benefits it bring. And it’s just the fact that it’s not as intrusive to them. And the last thing before I shut up is when we’re, when we’re grading these jobs, when we’re grading these projects to decide what’s good, what’s not, we’re taking a look at the lean history on that project and the, and the people involved. So if you come to us and you know, the project itself has seven liens filed on it from other material suppliers, other contractors that have participated, that’s a giant red flag and that’s something we’re letting you know, as well to where you might want to think this one through because we’re gonna be waiting into murky water. Or

Speaker 3 (15:27):
It’s not really the big job you want take on. Right. You know?

Speaker 2 (15:33):
And then same way with Paige does this all the time with a lot of the subs that she works with is like, Hey, what’s the reputation of the general contractor involved to where the last five, six jobs that they’ve run? Have they had issues there? Have they had liens filed? Have they had, you know, judgements filed against them? So that’s what we’re looking into when we’re deciding what are we gonna finance? What are we not gonna finance? So it, it helps contractors kind of have like a, a pre-screened version of their jobs. And also it’s just not as intensive for them to get that money quickly.

Speaker 3 (16:11):
Yeah. I feel like, like when, like you were using the word, like credit in there a lot. And I feel like you know, just saying like credit worthiness is not, it doesn’t even scratch the surface of like what we’re really looking at in terms of evaluating the risk of a project.

Speaker 2 (16:27):
Yeah. Like, we’ll take a peak. We’re not gonna just like ignore it, but just cuz there’s you know, little bump in the road that doesn’t scare us away because we have so much confidence in the other things that we’re looking at.

Speaker 1 (16:39):
Absolutely. And we’ve been talking a lot about this financing and you know, we haven’t, we haven’t really quite touched on exactly. Like, okay, here’s like line for line. That’s why this is here. That’s why we work together. Right? Like this is, you know, I think Pearson said before, before we started like, okay, we’re gonna talk about it. And then people are gonna wonder, how do I like what all comes with it? Like what’s in the combo. Well, here you go. Here’s your menu. So you know, let’s touch on these things really quickly. And then what I’m most excited about. I think I said that earlier, you very excited today in general is to hear the success stories. So we have a few success stories coming as well. But when we talk about level sets, materials, financing, this is what we mean, right? This is, this is the holy grail here.

Speaker 2 (17:27):
Definitely. I’m not gonna make this more than it needs to be. It’s very simple to where we work with the suppliers that you already use. Whoever you’re comfortable working with that, we’re fine with that. What we need to see before we evaluate a project that you want us to finance is just a copy of an executed contract between you and your customer. Doesn’t have to be anything extremely dense, AIA forms, just something signed showing. This is who we’re working with. This is the project itself. And you know, this is the scope just so we can see what what’s preliminary wise. What, what, what do we have going on? And then for that, it’s really just the quotes, estimates or purchase orders from your vendor showing what do we need to buy? How much? And from who once we have those two things, it could be multiple if you’ve got other quotes, but follow me.

Speaker 2 (18:25):
We send it over to our credit team. They’re gonna underwrite the project, do everything that I just mentioned. Are there liens there? What’s the GC look like that kinda stuff. And it takes them two days to knock that out. And then from there you you’ll get the thumbs up or thumbs down and then we’re gonna turn around and start coordinating with you. Hey, when do we need to buy these materials? Is this job starting now? Is it a month from now? Is there some kind of lead time on these materials? And then once we go ahead and make that purchase, that’s when the 120 days starts taking for you. So that’s the flow of it. That’s how it functions. I’m sure like there’s other small details, but that’s the, the meaty part of it. Yeah. yeah.

Speaker 1 (19:12):
And who, who, who works with the supplier? We talk to the

Speaker 2 (19:16):
Supplier. Yeah, we do. That being said, like, it always helps if you guys, if if it’s a supplier you always work with or it’s someone new, just giving them a heads up that Hey level, set’s gonna be calling to basically pay for this. Cuz we have had quite a few where we call people up and say, Hey, we’re trying to pay an invoice for someone. And they’re like, what in the world? What are you talking about? So yeah, a little heads off would be nice, but we’ll, we’ll definitely be communicated with them.

Speaker 1 (19:42):
Yeah. Awesome. Well, I, I think this was a great high level. You did exactly what you said you were gonna do and talking about the meat of, of the whole thing. Let’s get into some success stories because at the end of the day, you know, that’s really the, the proof that’s really the, the the proof behind like this, this really does work, right. The proven track record and et cetera. So Pearson, I know that you have a great one queued up. So you said you were gonna shut up by, I think you should just move on, keep it on.

Speaker 2 (20:14):
Yeah. so, well, there’s plenty of examples of people who just came to us for the financing. That’s all they do with us. That’s fine. But I want to bring this one up because it, it speaks to Paige’s expertise too, is I work with roofing company out of Tennessee, MHM, roofing and newer business. They broke all from a, a older business in Oklahoma and he came to us one looking for what, how do I protect the new projects that I have? So that’s that repeatable process with the required lean notices, the documents, the ti the deadlines that Paige will work with you about and saying, okay, now that I’ve got that secured, how do I get cash in the business to be able to take on jobs quickly? So I can scale up. And from there, what we’ve been doing is just when he has an insurance claim come through, as soon as it’s approved, he sends it to us.

Speaker 2 (21:15):
And we make that purchase where, before he was telling me that like, you know, he would be caught up because he wasn’t getting paid for his projects in time from the insurance company to where he had to wait until he was paid, until he could buy more materials to start jobs that they had already sold a month prior. So like he had this bottleneck around what he was allowed to even work on before he could. And then once we’re being able to hand him cash to, Hey, buy your materials, get ’em on site. Now it’s the, the reverse where he is like, I need to hire more crews. Cause now he’s got pallets of shingles sitting on in driveways. But he is got, you know, only three crews, four crews running around and they can only do so many roofs at a time.

Speaker 2 (22:01):
So like, he’s one of the favorite, my favorite people that I’ve worked with. And that’s a great example of someone who is like, go on hand in hand with how do I protect my business and become financially stable with a repeatable process, with lean rights management that makes me a non-risky customer for materials financing, cuz they know I’m taking the right steps to protect myself and get paid. And then how do I scale my business? He that, and then now it’s just like rinse and repeat as he continues to grow. So yeah, that’s, I think he’s done a great job of like taking advantage of both avenues and then marrying them together.

Speaker 3 (22:43):
Some of my favorite stories, I feel like are examples of people who have really, they stayed taking on the same size projects and sometimes, you know, get offers from people they work with, but it’s like a little bit bigger job than they’ve ever done. And just that initial amount, isn’t something that’s always, you know, the most practical it’s like keeping them up at night has ’em worried. Should I do it? Should I not? And I feel like some of those stories where the person is now able to say yes, think about it. Those stories for me are like always so fun to hear.

Speaker 2 (23:13):
Oh absolutely. Cuz like I, I preach this to a lot of people that I work with. I do not advocate using this on every single project cuz you have to, if you want to great, I’m not gonna say no, but it’s about using it for the right situations to where a, like you don’t have to turn down jobs or you can take on larger projects or Hey, maybe on one of those large jobs that Paige mentioned where there’s a very high material cost you know, there’s gonna be a longer delay for payment with the first draw. You can use this to pay for half of the materials. So it’s about finding how this works for you individually. It’s not a boiler plate method where everyone does it the same way. It’s just like, and that’s what will work with you on is how do we use this cash for the right projects and, and to the best of your abilities to be able to grow or just accomplish what you’re trying to accomplish. Cuz yeah, it’s not, not everyone wants to take on massive commercial jobs, but there are other things that they want to do in their business. And cash is usually one of the things that helps you accomplish those

Speaker 1 (24:26):
Cassius king. That’s what we hear

Speaker 2 (24:30):
In that’s all very good crown.

Speaker 1 (24:33):
No, no it was not, but a for effort there. This is one of our wonderful clients, Vivian bell at mesh. And some of the things that she highlighted was just the, this idea of the 120 day pay when up to 120 day pay when paid terms really changed the way that she did business. And so we love, we love Vivian. We love to share Vivian. She’s amazing. Mesh has scaled. I mean, they’ve been with us almost since the beginning and they’ve really been able to scale their business. So she’s a wonder a wonderful human, but also just a wonderful client and the things that she’s been able to do for her company have been astronomical. So we love to,

Speaker 2 (25:15):
I want the cat out the bag Viv. If you’re watching or you see the recording, you should have a king cake coming pretty soon here.

Speaker 1 (25:21):
Oh yeah. I love it. Yeah. I mean king cakes. All right. Well wonderful. We are now at that time we have a few minutes left. If anyone has any questions, I haven’t seen any come through the chat. But if anyone has any questions, go ahead and toss them in there. I may go ahead and give my closing sentiments as people either put questions in or just still digesting the information you know, when it comes to taking on challenges that contractors face taking advantages of opportunities that you have per potentially with financing materials, financing through level set can help you increase your cash flow and grow your business in a predictable and responsible way. And again, to both of y’all’s points, repeatable, equal scale, anything that we can automate, anything that we can do for the construction industry that allows you to have a repeatable action can that can help you scale your business is just one of the many ways that we help empower people in the construction industry. So I don’t see any questions coming in, but sometimes no news is good news. You guys did an awesome job explaining materials financing. Again, this is number two in a number three in a three part web N R series. I was about to say webcast series. It’s a webinar series. Thank you all for coming. We’re so incredibly happy to have you, oh let’s oh, we got a question. What your do as a general contractor and owner builder? Can I use this P

Speaker 2 (26:55):
Yeah. So the one caveat is sometimes it’s tough as an owner builder. Mainly because since we’re used lean rights to protect the materials that we’re purchasing, we like to have some kind of chain of responsibility between like, Hey, if there’s, if we’re dealing with a sub there’s someone else that we can always jump up to next. So projects where there’s likely a lender involved yes. Or any project where you’re just acting GC for another project owner. Yes you could. Another thing that some of the GCs have done that I’ve worked with is just offered this to some of the contractors that work below them. So if they know that, Hey, there’s an expensive piece that’s going on this project, they can, they can provide this to their subs and say, Hey, we’re here to work with you guys and partner with you as well, which is the right kind of dynamic that you want to have as a GC, helping out the subset. I’m sure you use on very similar or the same jobs whenever you can.

Speaker 1 (27:59):
Awesome. Great answer. Well again, thank you all so much. We’re so grateful to have you this recording as well as a few other assets, collateral resources. We’ll be emailed out to you tomorrow. Thank you guys so much happy early weekend. It’s almost Friday. We almost made it. Bye everyone.

Speaker 2 (28:19):
See y’all.