There’s probably no more important time for general contractors to have a strong and trusted relationship with subcontractors, considering all of the challenges that range from supply chain to workforce shortages. Maintaining those relationships over the next two years may well depend on general contractors going the extra mile to support these essential partners.
Good planning that supports subcontractor needs, clear and transparent communication across the lifecycle of a project and, likely the most important, on time payments. Technology can facilitate all of these actions, but especially fast payment practices. Cash flow is one of the top, if not the top, concern for nearly all subcontractors. Many fail when costs exceed profits, often because of payment delays from clients and partners. That ebb and flow of payments can sink an organization. If cash flow goes too low, these organizations have limited funds to purchase materials, pay employees, buy or maintain equipment and even take on new projects. When subcontractors of any size have a reliable cash flow, they have the wherewithal to effectively manage projects, people and equipment.
That’s one of the reasons that third-party or receivables financing or invoice factoring has become so popular in many sectors outside of construction. Today receivables financing is utilized by 50% of S&P 500 companies and has become a competitive financing option particularly for small and medium sized businesses.
Through a receivables financing program such as Constrafor’s Early Pay Program (EPP), a subcontractor is paid based on approved invoices. Once an invoice is accepted by the general contractor, the EPP program pays the invoice immediately to the subcontractor. This allows general contractors to offer an alternative financing option to their entire subcontractor network, at no cost to the GC, helping subcontractors benefit from accelerated payments and reduce overall project risk.
Knowing receivables will be paid quickly evens out a subcontractor’s cash flow. So how can a general contractor help? In some cases, general contractors are partnering with SaaS and fintech companies such as Constrafor to support their trade partners.
How offering subcontractors the EPP financing option can strengthen GC – Sub relationships:
Building and maintaining healthy relationships with subcontractors improve project performance which translates into successful projects delivered on-time, which, in turn, enhances a general contractor’s reputation. With improved and available cash flow through programs like Constrafor’s EPP, subcontractors are able to pay suppliers faster, settle payroll in a timely manner, invest in equipment and technology, and overall continue the business with an assured cash flow. So for subcontractors who consider timely payment to be a top concern, EPP financing ensures quick access to cash flow, which leads to strong long-term relationships across the entire lifecycle of a project.
For General Contractors who are interested in introducing Constrafor’s Early Pay Program to their Subcontractors, Schedule Time with an Expert Now.
For Subcontractor who want to get paid now with Constrafor’s Early Pay Program, Get Started Now.