Stress less, grow more: Learn how with Materials 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 Materials Financing.
Register for this webinar to learn:
- Why payment problems are such an issue in the construction industry (and how to combat them)
- Some proactive advice from two construction financing experts on how to keep your business protected and growing
- Real world examples of how Materials Financing can help grow your business, help you gain financial flexibility and stabilize your cash flow
Speaker 1 (00:03):
Well, thank you so much, everyone for joining us today, we’re really excited to talk about how materials financing can help you grow your business, alleviate stress give you more flexibility with your finances and really take control of your cashflow. We’ll be talking about all of that and really, really, really excited about it. So as we dive in here, we have today’s speakers. Kevin and rain. I will let you introduce yourselves. Rain. Why don’t you go first and then Kevin?
Speaker 2 (00:31):
Yeah. my name is rain Martin. I it says construction payment expert here. So yeah, that’s I’ve been with level up for a little bit outta over a year now or right at a year now. And just, you know, being up some of our processes on the financial side and specifically around materials financing. So I’m, I’m excited to share, share what we know and learn more about you today.
Speaker 3 (00:55):
Yeah. And I’m, I’m Kevin, as it says there I’ve been in a number of different positions here at level side over my three years, just helping supplier relations and specialty contractors get what they need and have been on the materials, financing and credit team for about five months, six months now.
Speaker 1 (01:16):
Awesome. And we are so happy that you are here. So we’re really excited as we said again, to talk through a few of these things. And first of all, again, just wanna say thank you to everyone who came in and joined today. Let’s go ahead and get started. So we are level set. We were recently acquired by Procore, but we are still holding true to our level set route. We are very excited about that acquisition and we do a whole lot of things, but mainly we help people. We empower people to get paid. We help everyone from materials financing to your lean rights and everything in between. We also have a legal solution and all sorts of really great stuff. So again, thank you for coming. If you do have any questions as our wonderful dusty, I mentioned in the chat, please add have them here.
Speaker 1 (02:05):
We’ll be happy to answer them for you. We have a relatively small group with us today. So please utilize this time with Kevin and rain and ask as many questions as you possibly can. They are here for you to answer your questions. And so we’re excited to get started. All right. So this is one of my all time favorite questions to ask, because it covers a range of things that everyone in the construction industry deals with. But at the end of the day, why is it so hard to stay cash positive in that industry? Rain? Do you wanna take a stab at it first?
Speaker 2 (02:41):
Yeah, I’ll say I always like to start with saying that the odds are sta against you in a lot of ways. So, especially as a specialty contractor subcontractor trade partner you know, you’re you really, everything kind of hinges on you on the job, but the advantages aren’t really out there for you to control your cash flow on a regular basis and to be in control of like your day to day operations, everything that you do is hinging upon somebody else and their ability to be able to fulfill their need for you to move forward. So it, that in itself is gonna make it difficult. You got things to pay for on a day to day basis, you got your, your labor or you got your materials yet anything and everything that can come into play in a day, whether it be an emergency, things like that. And the odds truly are stacked against you, but anything you can take off your plate to to start to move that forward or to alleviate some of that concerns, what’s gonna help to get you towards that cash positive focus that you want. But you know the, the odds are definitely stacked for sure. And that that’s one place I like to start. Kevin, do you wanna jump on in there as well?
Speaker 3 (03:46):
Yeah, I’d say it’s almost like you’re chasing a carrot or you have these wheels stuck in the mud because a lot of specialty contractors that, or even GCs are finance for someone else constantly, and they have to front all this money and incur all of this risk in terms of their cashflow at the beginning of a project. And it creates this cycle where they’re inevitably not just on one project, they’re on multiple. So they haven’t, they’ve put up material costs at the front end, and then they’re starting another one and they’re putting it up on that end. And once they’re getting paid, this project is paying for the next one. So it’s just this constant cycle of cash flow issues that pitches everybody, and it causes a clutter. And not to mention margins are thin in the, in the construction industry as it is. So like, rain had mention you, you incur this risk up front, and then you have other bills to pay. You have your labor costs, you have a number of other things that are still on your plate and you, now you have to go play your vendors and you have to go pay your sub subs. And it can be hard to stay ahead of that sometimes.
Speaker 2 (04:58):
Yeah. And, and, and it really is hard to find people who were like there to help as well. You know, I spent a good amount of time in the band team industry. And, you know, you have a lot of hoops to jump through, to go that route. If that’s the route that you’re trying to pursue they wanna see you in business for a certain amount of time. They want to dive into all your books and you know, kind of pick ’em apart in a lot of ways just to be able to like help to move you forward and to achieve what you’re wanting to achieve. And some, sometimes that’s just not the best option and sometimes it’s not an option. And what do you do whenever you get to that point? And that’s it, it can just be hard. It’s it’s a really hard, hard industry to be in from that standpoint, but that’s part of what we’re here to help and what we want to help.
Speaker 1 (05:44):
Yeah. You know, I think what I hear a lot of talking to customers is mainly especially contractors is they feel like a bank. And with your background in the banking industry, what does that, what does that mean to a specialty contractor to say I’m so sick and tired of feeling like a bank? How, what, what does that mean? Exactly.
Speaker 2 (06:06):
Yeah. What we’re seeing is that a lot of times the specialty contractor is hunting all the funds for that project. There’s they’re in current, all the, at that point, they are buying all the materials to actually get the project moving and going forward. They’re paying for the delivery cost of all that. They’re making sure that things are falling into place so that the GC or the property owner or whoever it is that they’re working with, or that they’re keeping that on the right pace for them. And they’re the ones who are over extended for you 30, 60, 90 days on the industry, average, 120 days, things like that. That’s you know, you’re the one incurring that risk and you’re taking that on and you’re bank role. You’re fronting all the stuff for that project. And having everybody come to you, and then you’re not getting paid until the back end. And that, that’s just sometimes that’s too bit of a risk to take on
Speaker 3 (06:57):
The number. Rain is 83 days on average to
Speaker 2 (07:00):
Speaker 3 (07:01):
And most, most contractors. So it’s 83 days on average, but then vendors and buyers are giving 30 days, 45 days in terms of net terms for when they expect to be paid back. And then someone’s not getting paid until three months out from the start of the projects. So now they have all these bills, their credit is getting hurt. Their lines of credit are being affected because of it. And it just creates a strain from top to bottom, no matter who you are in that payment chain.
Speaker 1 (07:32):
Absolutely. And one of the things that I often think about is just because something has been one way for so long doesn’t mean it has to be. And we talk to a lot of people that say, well, this is how I’ve done it for the last 30 years. And, and, you know, I know from our software side as well, that comes into play a lot, like, well, I’ve been doing, this is how I’ve been doing my lean rights for 30 years, or, you know, these things. And it’s like, but it doesn’t have to be, and we can help. And we can automate certain things and we can be a partner to you. And there’s other solutions out there as well, but you know, when it comes to your cashflow and when it, when it really boils down to putting dinner on the table for, for you and your business and the people that work for you finding a partner, that’s gonna be there for you and support you is really, really important. And so I think that’s a good segue into, you know, why do you need more option more than, you know, just the standard somebody’s gonna pay me when the job is over, you know, et cetera, why do we feel like we need, why does the, why do we feel like in the construction industry, we need more options for payment. And what are some of those options who wants to take it? Let’s say, well, rainy go first. <Laugh>
Speaker 2 (08:51):
Kevin, Kevin looked like he had something to say, I don’t wanna jump.
Speaker 3 (08:54):
I was just gonna say, it’s funny, cuz rain and I were having the side conversation the other day about people overextending their lines of credit. Like you don’t wanna put too much stress on that side of your business, cuz honestly we, you never know when some emergency is gonna pop up and when you would actually need to use that in that case. And sometimes you could be put yourself in, in pretty crappy situations, if you have to go and tap into that. So having a multitude of options is always good because you, you never know when you’re gonna need another contingency, but I, I think rain can speak to it more in terms of like, you know, bank loans or something like that. So I’ll pass it over you
Speaker 2 (09:33):
Right now. Yeah. And speech, and I know you’re rolled up liner liner credit, but speaking specifically to that you really like, you don’t want to overt extend that thing. You wanna, you want to keep it at a certain range if, you know, if you Val, if you’re at 50% utilization of that liner credit, you wanna leave that other 50% open because who knows what happens tomorrow, that is an major emerge for your business that you need to tap into those emergency funds for. So from that standpoint, mines, accredit are, are amazing if you’re able to obtain them in the first place if you’ve been in business long enough, if they qualify you based on the three years of digging, they’re gonna do into your boats sometimes longer if you’re able to go through those processes and like actually make the, those make it to the point of having the line of credit.
Speaker 2 (10:19):
Yeah. It’s a really good option and it’s amazing to have to back up your business. However, you don’t want to overextend it. You wanna keep it at that range to be there whenever you need it. And whenever you need to lean on something for that emergency that comes along, that you don’t think about, you don’t plan for, but it’s there. Then you know, other options as well, you there’s, you know factoring that’s out there factoring can be a bit of an evasive process. It can be right for the right people not saying that at all, but it can be a pretty invasive process where they want to take over your whole book. They want to go back sometimes a year plus and dive into every everything and like take control of all those invoices. Whereas it, it, it doesn’t really give you a ton of flexibility. It’s either all or nothing. And then once you’re in, you’re in, and there’s not really an easy way out from that point. So that it it’s an option, but it’s, it’s another one of those that I’m, you know not as keen on, but I, I do see whenever it makes sense as well. Kevin, you got, you got some more there.
Speaker 3 (11:21):
Yeah. I I’ve worked just having been here for a while. I’ve worked with a lot of factoring companies who actually use our software a lot. And not only is it invasive because they take your whole book of business in terms of your accounts receivables, but they’re looking at you in totality and not on a new individual basis. And then they’re also taking something up sometimes upwards to like 35% of each invoice. So not only are your margins thin, already, they’re taking something off of top of that, making everything even thinner and you are coming out with minimal in terms of what you’re actually getting in the business. So if you’re planning for growth, but then you have a factoring company or a collections company trying to pick up on those invoices, you’re going back into the red. Like you’re not getting ahead again. Like I had said earlier, you’re chasing that carrot, cuz someone’s just dangling run of you and you’re just trying to chase after it.
Speaker 2 (12:16):
Yep. And other options just so we don’t dwell too many just on two specific ones. I mean, you have your savings accounts, but obviously you don’t wanna touch your savings. Your savings is there for a reason you want that to continue to build up. You don’t want to use that for absolutely the job to job purpose that’s out there. I know credit cards sometimes get brought, but again, a credit card is an emergency use fund. You don’t want to use it for these projects that who knows when you’re getting paid because credit cards you know those charges get pretty, pretty intense pretty quick if, if you’re not careful. And so if you don’t know, when you’re getting paid on a job, you don’t wanna put something like that on it. You want to, you want your financing. Do you want it to be tailored to like what you’re actually in it for? And credit cards, just kind of another like overarching option. That’s more like not really fit for the specific purpose. It’s just a gen generic thing out there ready to go when an emergency happens. So am I forgetting any I’m?
Speaker 1 (13:14):
Well, you know, one that sticks out to me because I joining this joining level set and learning about the construction industry, I was completely blown away at the numerous specialty contractors and, and GCs that I talked to that took out mortgages on their own homes. And you re utilizing their own personal finances to fund their business. Because as Kevin said there, you know, you’re chasing this carrot. We find that at, you know, in this industry, you, you always feel like you’re one big job away from making it. You’re, you’re one big job away from smooth sailing and that that’s not always the case. So you bring out, you know, all these options with your personal finances thinking like, if I can just do this, I can get one more. You know, then you find yourself in, in a, in a much more difficult position than you were in, in the beginning because now your personal finances are tied up in that.
Speaker 2 (14:12):
That’s a really, really great point. Like I, yeah, I would never advise or suggest or whatever word I should be using there. <Laugh> to use your home or as a collateral for something like that or any of your personal finances for that purpose. Like you know, that’s, that’s what you’re saving up for your family. And that’s what you I, I, I know, like you said here you’re one job away from making it, but what happens if that job doesn’t work out and then you’ve got your home tied into that, and now you’ve sacrificed all your personal savings or your personal credit cards. And then what happens when those actual personal things come up that you need those for? And then just, I mean, your home, that, that’s your home, that’s, that’s, that’s your baby. Like you don’t want, you don’t wanna lose that at the end of the day. And so I, I always say like, don’t, don’t, don’t put your personal stuff up for the business. Keep those things separate if you can, if at all possible. And I, I never like to have that out there as an option at all, cuz that that’s just not, it’s not the route to do at all.
Speaker 1 (15:17):
I, I was completely floored and blown away that it, it happens all the time. So gentlemen, I would love to get to, to the meat of this webinar and really what I think our part things are here to hear about because we all know that you guys all know everything that we just said, right? You’re the ones that are out there in the field, making this happen in the office, doing accounts receivables you know, you’re in on the front lines. And so now what I want to pivot to talk about a little bit is how, like what makes materials financing one of the best cash flow solutions for this industry. And I wanna be specific on that. Not why it’s a great product because we do believe it is a great product, but why is it so great for the construction industry as, as a whole in, in and of itself? Kevin, do you have Kevin thoughts on this here or Randy? I’ll
Speaker 2 (16:14):
Jump. Yeah, I’ll jump, I’ll jump really quick. And then I’m gonna hand it over to Kevin cuz I actually had a call this morning. So it’s very prevalent to this specific question is exactly what you just said, Kara. And they, we were talking to them and she out of nowhere just said, wow, this materials financing product really is tailored for the construction industry in a way that I never expected. And that’s so speaking specifically to what you were just saying, like this is the fit and the customers that we’re able to work with, the clients that we’re able to build, they’re able to see that. But I, I didn’t wanna lose that thought. So sorry to jump ahead real quick, but Kevin, go for it. I know you, I know you teed up, so
Speaker 3 (16:57):
No it, so I mean, how we, how we like solve this, this problem we have, we had discussed it earlier. You know, you get a contract, you start a job, you incur this risk for that finance at the beginning, you’re being a bank for someone. Then you’re waiting 30 days, 60 days, 90 days to get paid materials, financing, bridges that gap. So we’re able to give you that cash flow so you can stay liquid throughout the lifeline of that project and other projects and move money around in ways to, you know, put pay for labor, pay for equipment. So it’s a really great short and medium term solution for relieving that stress quickly. So you can go out and do your job and focus on the important things until the time that you do get paid. So that that’s really the plug and play method that we, you know, Institute here in terms of making sure your cash flow stays. Like I had said stays liquid. Go ahead.
Speaker 2 (18:00):
Yeah. And this is, I mean it is truly project to project specific. It’s not a, an overly invasive process. If you, you know, we have plenty of our clients who use us one out of every five projects, one out of every 10 sometimes. And it’s on the projects that they see like a true need for coming in and like being able to extend those terms a little bit longer, give themselves some more flexibility and have options out there to be more in control of their day to day cashflow and, and keep their cash on hand available. So it, and that, that’s why I think this is the solution it, because it is tailor made for what you need on a day to day basis. And you know, you can go a month without using this two months without using this three months, whatever it is, and then find that right project that comes along, that makes sense to, to partner with us on and we’re here to help with that. Cause our, our focus is making sure that this, this works for you and that you’re able to carry this forward and do the right thing for your business. And so we’re, we’re, we, we, we just wanna be there when you need us and that’s it’s kind of that ill be there thing. So, and, and it’s the truth. We will be here. We really will.
Speaker 1 (19:08):
I’s gonna start singing.
Speaker 2 (19:09):
I, I almost did almost broke into it, just think. So
Speaker 3 (19:12):
I think, I think the adage that I use is it’s a lever to pull when you need some pressure relieved. Right? And like we had said before, you know, factoring companies or other solutions typically look at the business as a whole, as we do from time to time, but it is specifically project to project and we’re gonna find the solution that works best for you on whatever project it is, whatever the, whatever the contractor feels they need the most help with.
Speaker 1 (19:43):
Mm-Hmm <affirmative>. Yeah. And I, I, I heard a couple of times you guys mentioned the word partner and I really want y’all to elaborate on that because this is one of my favorite aspects of materials, financing, and level set in general is that we, we become a partner in many ways. So I would love for you guys to touch on, on what that really means.
Speaker 2 (20:05):
Yeah. The, this is something I might super, super passionate about. Anybody who tells to me for any extended amount of time, here’s me talk about the partnership and the relationship that we’re building here. And it it’s true.
Speaker 3 (20:16):
We’re literally talking about it this morning in our meeting. Like literally I talked about it all the time discussion,
Speaker 2 (20:21):
<Laugh> it? It’s true though. It’s, it’s really like what we’re here for and what we’re here to solve and what we’re here to, you know, just be there for, we, we wanna be your partner. We wanna be that extension of your that’s there to help guide every step of the way we wanna make sure you’re getting paid. And we wanna make sure that like your project’s successful and we wanna make sure that you’re able to grow based on that successful project and be able to take on more and more and more from there or stabilize your business. If that’s, if that’s the goal, if it doesn’t even have to be like wanting to grow from that standpoint, it can be just truly stabilizing your day to day process and achieving exactly what you want from your business for your personal life as well. And whatever that goal is, whatever, whatever solution you’re looking for out there that’s solution, we want to be there for, and we wanna solve for and any way that we can fill in to solve that. That’s, that’s where we want to be. And we’re working with you every step of the way to do that.
Speaker 3 (21:16):
There’s also a, a human aspect to it too. Like you don’t just come off as a dollar sign, some coms and a decimal point to us. Like you have someone like myself who, who is understands the ins and outs of the business, understands the project to project difficulties that someone will face and is there to solve whatever the problem is that comes to you. Like we’re, again, you’re not just numbers on a sheet or on a board or in a computer to us. Whereas a lot of other solutions are where you’re getting hot potato around from account manager or credit manager or whoever it is. You’re working with someone like myself, like ran like Kara, like to solve these problems in real time, on a day to day basis. So we have that extra love, that nice warm hug to give you to, to understand the ins and outs of your business and solve them the best way possible for you.
Speaker 3 (22:12):
I know we’ve kind of been dancing around in, in terms of like what actually is going on or what we offer. So in terms of like how the actual solution is implemented y’all so basically the way it would work is you come to us with a job and you have a purchase or an estimate from a supplier and your contract with your customer, turn it over to someone like myself, we run it up the ladder to our credit team and give you a thumbs up on how it would work. Or if it’s something that we would take on. So we will pay the supplier on the first day. So you don’t E they don’t have to worry about net terms being extended or paying someone when paid the supplier is nice, fat and happy. Cuz they’ve been paid right away. We turn around, get the materials delivered to the job site and then extend 120 day payment terms to pay us back.
Speaker 3 (23:03):
So when you do get paid, even if it is difficult being paid, you know, 60 days, 90 days, something like that, you we’re there to partner with you and extend terms beyond what normal supply houses would. On top of that credit, approval’s pretty, pretty quick. As soon as we get some of the information we turn around and typically it’s 48 to 72 hours within that timeframe, somewhere around there to get approval done. And again, it’s, it’s project to project. We’re, we’re gonna work with you to figure out where this best plugs in brain. Was there anything
Speaker 2 (23:40):
I think, yeah, I think you I’m pretty sure you hit all, all those as you were going through one thing I’ll, I’ll just kind of touch on just a little bit more that, that supplier relationship. So we’re, we wanna work for the suppliers that you’ve always worked with. Like, we don’t wanna like damage any of your relationships. We don’t wanna tell you like to go down the street and use somebody else that you’ve never wanted to want or never use before. We wanna keep building on those relationship that you already have in place. Or if you’re trying to break through with a new supply shop and they just haven’t extended terms to you, or haven’t wanted to take you on as a client, like we’re an option there to like make you a cash buyer on day one, start to build up that relationship with that new supply shop. And then on top of that, get preferred delivery because you’re a cash buyer. Now you get the delivery early. Whereas the, if you’re on terms with them, you’re getting the last delivery that’s going out the door. So there there’s a lot of advantages there in terms of the supplier option as well. But especially
Speaker 1 (24:37):
With all of the supply chain delays yep. Faster, you can get it, anything that you can cut out. And, and one thing that I also want to really emphasizes that you guys are the ones speaking with the supplier, you are not only facilitating this, but you are making sure that all the tees are crossed. Eyes are dotted. And that’s the partnership aspect that is not only taking a financial strain off of the shoulders of the specialty contractor, but you’re also a of taking off a personnel strength and saying, we’re gonna work with this person and we’re gonna help you out. And we’re gonna make this happen. We often see discounts on discounts on discounts when it comes to supplies. You know, there’s a really big partnership aspect that goes into that in addition to alleviating some of that financial stress. And I know you talked about really being passionate about our customers.
Speaker 1 (25:30):
And one of our favorite customers to share is Vivian bell. We absolutely love her. She works with mesh, which is a commercial millwork company, and she really spells out exactly what we’ve been saying this whole time. You know, she doesn’t get paid until sometimes 60 days or more, more and extending that to 120 has really changed the business. And especially for these verticals that have these industries that have really high material costs, HVAC plumbing, these things that take a lot millwork that take a lot on the front end to then produce the, the finished product on the back end. This is a great way to alleviate some of that stress in between those jobs. So we love Vivian. We love all of our customers. <Laugh>, Vivian’s very special. Awesome. Yeah. Anything else that you guys I see wanted to add?
Speaker 3 (26:23):
I, well, I see, sorry, Kara. I see a question in the chat from Gina about material costs over the course of a job. We do phase out projects. So if you anticipate that you’re gonna need something at the beginning of a job, we can get it paid for, with your supplier then, and then if another set of materials needs to be done, you know, a month or two later, again, we will work to get that pay supplier paid when those materials are getting set to deliver, because obviously companies have different phases. Like the concrete company will come in first, pour some cement and then maybe they’ll come back at again at the end of the job to do another pour for a different portion in it’s still the same job. It’s still the same, you know timeline length, but at two very different points. So we’ll phase it out and work with you to send over the materials when necessary for each phase of the job specifically.
Speaker 2 (27:19):
Yeah. We, we have clients who have done upwards of nine or 10 phases of the same job just based out over time. And it’s just, you know, making sure that the materials are coming whenever they need ’em, they can also space out the financing as well based on their schedule and whenever it’s gonna work best for them. So there there’s no like limitations there for how many phases we can do. And we’ll always like you, if it’s a four month job and half the materials are needed on the front end half are needed a month, three, like we could space that out and you know, separate those out in terms of the schedule. So,
Speaker 3 (27:55):
Yeah, and Gina, to, to just kind of touch back on the, the account management aspect of it, that’s where someone like myself comes in to understand when things are gonna need to be scheduled out for y’all. So we can game plan when things are gonna be paid or when your supplier needs to be paid based off of your relationship with them.
Speaker 2 (28:17):