Strong relationships between General Contractors and trade partners can help create a mutually beneficial and productive partnership, ensuring the success of a construction project. When a trade partner has a positive relationship with their GC they are more likely to:
- Complete their work on time and to the required quality standards
- Cooperate and find solutions to any problems that may arise to keep a project on track
- Work with the GC on future projects, building a loyal and reliable workforce
This can be especially beneficial for GCs, as it allows them to build a team of trade partners who they can rely on to deliver high-quality work and to meet the specific needs of the project. Trade partners who have a strong relationship with general contractors may even offer discounts or other incentives, which can help to reduce costs and improve the overall profitability of a project.
One way that GCs can support their trade partners is by offering payment acceleration options. Payment acceleration refers to the process of paying trade partners sooner than the terms outlined in the original contract. This can be done through a variety of methods, such as early payment discounts, factoring, or supply chain finance. By offering these options, GCs can help their trade partners improve their cash flow and reduce financial stress.
Accelerated payments allow trade partners to access capital sooner, which can be critical for small businesses. Many trade partners, especially those that are small or minority-owned, have limited access to traditional forms of financing such as loans or lines of credit. By providing payment acceleration options, general contractors can help these companies maintain their operations and continue to grow. Furthermore, when trade partners do acquire financing options that are overpriced and expensive, the hidden cost is in the increased amounts on project bidding as well as pricing on change orders during the course of a project. The money flows one direction and the top GCs know this very well.
5 Ways Accelerated Payments Improve Project Outcomes & BUILD Relationships
- Building trust: By paying subcontractor invoices early, general contractors can demonstrate that they value the work of their subcontractors and are committed to paying them on time. This can help to build trust and establish a positive working relationship between the general contractor and subcontractors.
- Improving cash flow: Subcontractors, like any other business, rely on cash flow to pay their bills and keep their operations running smoothly. By paying invoices early, general contractors can help to improve the cash flow of their subcontractors, which can in turn help to ensure that they are able to complete their work on time and to a high standard.
- Reducing disputes: By paying invoices early, general contractors can help to reduce the likelihood of disputes arising over payment. This can help to ensure that the project runs smoothly and that the subcontractors are able to focus on completing their work to the best of their abilities.
- Encouraging repeat business: Early payment of invoices can help to establish a positive reputation for the general contractor, which can encourage subcontractors to work with them again in the future.
- Improving Efficiency: When trade partners are paid on time, they are more likely to complete their work in a timely manner, which can help to keep the project on schedule and within budget. Additionally, when trade partners are able to access capital sooner, they are more likely to be able to purchase materials and equipment in bulk, which can further reduce costs and improve project efficiency.
Offering payment acceleration options allows trade partners to access capital sooner, which can help to keep their businesses running smoothly and improve the overall efficiency of a construction project. GCs who offer these options will be seen as a valuable partner to trade partners, which can help to build long-term relationships and ensure successful projects in the future.
Constrafor's Early Pay Program (EPP) is a receivables financing option that allows trade partners to receive payment for their work sooner than the terms outlined in the original contract – at no cost to the GC. When a GC participates in the program, trade partners can submit approved invoices for payment and receive funds in as little as 24 hours. Constrafor provides financial transparency and reimburses GCs for SDI premiums. This means that the GC saves on insurance costs by paying trade partners early, and trade partners benefit from improved cash flow.
Early Pay Program is simple and easy to use, which means that GCs can start offering payment acceleration options to their trade partners quickly, without a lot of extra work. Participating in the program can help to build long-term relationships with trade partners and improve the overall efficiency of a construction project.