Construction subcontractors face many challenges in the construction industry, but understanding how to manage risks and pressures both internally and externally is the key to subcontractor longevity. In part one of our series, we identified three areas where subcontractors may experience some challenges and how they can go about solving these issues. This last part will discuss more challenges and solutions.
A Lack of Cash Flow
Maintaining a healthy cash flow is the lifeblood of any business. Unfortunately, due to the financial risks subcontractors carry, the risk of running out of cash is ever present. For example, many subcontractors must wait anywhere between 30 to 90 days to get paid for projects they’ve completed. Unless your business already has a good amount of capital, you may find yourself struggling to pay for laborers, fronting cash for expenses, or paying for needed project materials, all of which can lead to a dispute requiring the legal expertise of a Sarasota construction attorney. Finding ways to improve your cash flow is essential to your success.
Access to Capital
The topic of cash flow leads us to another important topic: capital. Again, subcontracting requires a good amount of capital to stay afloat in today’s economy. Subcontractors are finding it challenging to acquire capital from traditional banking sources because lenders are more stringent in the credit lines they are willing to open. Seeking alternative sources of capital is important. Subcontractors can research microloans for small businesses, consistently contribute to their own savings, work with customers and general contractors who can pay within 30 days of service, or look into alternative burrowing options such as invoice financing also known as factoring. Invoice financing allows you to borrow money against your unpaid invoice so you don’t have to wait to get paid before starting the next phase of a project or to begin a new project.
How can you stay competitive in such a competitive industry? Keep an eye on your competition and what’s trending in construction. Currently, trends in construction center around repositioning your business to overcome labor shortages, implementing technology to streamline existing practices, and finding ways to maintain your margins as construction costs increase so you can maintain a positive bottom line.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.