Break the Paycheck-to-Paycheck Cycle

How to Break the Paycheck-to-Paycheck Cycle

Are you stuck in cash flow purgatory? Alternative funding sources could be the solution.

Many contractors find themselves stuck in a frustrating cycle: you try to grow your business but without healthy cash flow, you pay more for materials, so you’re stuck bidding the same smaller, less profitable jobs. Let’s look at how traditional funding sources can exacerbate the problem and how alternative options can help you break the cycle.

The Long Repayment Cycle

We’re all familiar with how long it can take to receive payment for a job completed. Even if you complete your work toward the beginning of a project, many owners and/or GCs withhold retainage until the project is further along in the process.

Because of this typical practice, it can be nearly impossible to begin new projects without some sort of funding for materials. You’re still waiting to be paid for your last job, so you can’t afford the next one. This is when many contractors resort to bank lines of credit or business credit cards to get by.

Traditional Funding Hurts More Than Helps

But these typical ways of obtaining funds don’t work for construction companies, especially those in the growth stage. In lines of credit, you may be able to secure enough funds to bid your next immediate project, but if you’re trying to grow and bid multiple jobs at once, terms are frequently unfavorable for you to take on additional funding from other sources for other jobs. You’re also subject to liens placed on your business by the bank, leaving you at risk if you’re unable to make payments.

Business credit cards are even less realistic for growing contractors because of low credit limits – useful only for general business expenses but not for large material purchases – and exorbitant interest rates.

Alternative Funding Options for Contractors

Project-based contractor financing is a lesser-known option in the construction world, but it’s a lifeline for those contractors who are ready to take their business to the next level. STACK partner Billd offers one of the best platforms we’ve seen for this type of financing.

Partnering with Billd means that once you identify the project you’ll be working on, Billd pays your materials supplier upfront in cash and you pay payments over an extended period of time (currently 120 days with Billd). Often you can get approval the same day you apply.

The Benefits of Cash

Material suppliers are feeling the strain of pricing volatility and supply chain issues more than ever. Paying upfront gets you perks you just can’t access when you’re busy negotiating terms, like locking in lower prices, solidifying your relationships with your suppliers, and increasing your pricing accuracy.

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Видео Break the Paycheck-to-Paycheck Cycle канала STACK Construction Technologies