Construction Financing for Contractors
Contractors are tasked with charting a project’s path forward by disseminating finances according to the cash flow profile of expenses established in the cost estimate and design stage of a particular construction project. As a rule of thumb, the cash flow profile of expenses and incomes follow the progress of a construction project. In other words, the contractor will be paid periodically as construction is advanced and measurable results are produced.
It’s up to the contractor to establish a fair markup that not only provides for the proper compensation of all workers, but also considers the ongoing expenses of the project and the price negotiated in the contract. Generally, contractors seek monthly reimbursements for work completed. If you are a contractor in need of a qualified legal professional to assist you with contract review or other finance-related issues, contact a construction lawyer in Brentwood, TN.
When a construction project kicks off, the contractor may have already amassed a considerable sum in pre-construction expenses. This time, commonly referred to as “time period 0,” can be a point of contention, since owners are usually reluctant to accept the preliminary cost of construction. The recurring monthly payments, which are typically less expensive, seem to be easier for owners to swallow. Therefore, it is important that, as a contractor, you don’t inflate pre-construction expenses; otherwise, your project may never get off the ground.
Expenses for a construction project are typically fluid and continuous, which means you should be receiving compensation throughout the duration of the construction project. If an owner stalls on compensating you for your work, you should suspend work immediately until you determine the cause of nonpayment. Since work is billed after completion each month, missing a single month of payment can set you back considerably if nonpayment continues for the duration of an entire payment period. If the owner does stay on schedule with payments, your last payment will be received at the conclusion of the construction project.
Nonpayment is a common issue in the construction industry. Sometimes funds are poorly managed and sometimes they are never acquired at all. In some instances, an overeager investor will sign their name on the dotted line without the financing to back it up. You should closely monitor the behavior of any owner you work with and press them for payment when they are behind schedule on compensating you for past provisions of labor and materials.
If you would like to speak with a construction law attorney in Brentwood, TN, please contact us today.
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.