Any money down?

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sjaniga

Member
We have only been in business for a year now and a lot of our work is residential new homes, $10,000.00 or less, so far with most of the generals we cant get any money to start because the generals dont have it until work has started. Now that we are starting to quote more of the larger prjects, $30,000.00 and up with large contracting firms, is it normal to ask for a percentage due at contract signing, with multible billings throughout the project, as to not get caught behind the eight ball?
 

templdl

Senior Member
Re: Any money down?

This is the way I look at it:
It depends upon a number of things. Your market and what the competition is doing as well as your relationship with the contractor.
Does the contractor need to provide you with a deposit or a down payment if your competitors don't require it? Is your pricing attractive enough for them to agree to your payment terms? Is the quality of work and service of great enough on value for them to want to agree to your payment terms?
The contractor often times will do anything that they can get away with. If they can get you to foot the cost of material and labor until they get paid then the money comes out of your pocket. One would at least expect to get a deposit for the cost of the material which you are installing in the construction project where all that they would owe you is for labor. Depending upon the duration of the job you could agree to certain bench marks for progressive payments for work in progress.
 

bphgravity

Senior Member
Re: Any money down?

On smaller jobs at roughly below $5,000, I contract payment of 70% of total at the completion of the "rough-in" and the remaining 30% and any change-orders at completion of "final" inspection. On jobs that exceed $5,000, I contract payment of 10% before start of work, 60% at "rough-in" completion, the remainder at "final". This has seemed to work best for me and builders, developers, and GC's have never really had a problem with my policy. Like you, I don't want to eat so much material costs on long and expensive jobs. :)
 
Re: Any money down?

Just a question, do any of you do jobs that require AIA billing. (AIA Document G703)

If so, you would put a line item in your schedule of values to cover mobilization and bond. This can be billed immediately. As far as materials, on this type of project, materials can not be billed for until stored on site, or in say a warehouse with proof of insurance, or installed on the project.

Many architects will require proof of the materials being invoiced (you don't have to show them the invoiced amount) from your supplier before they will approve a pay app.

There is still ways you can "front load" a job and never be behind the 8 ball.

Roger

[ March 27, 2003, 12:54 PM: Message edited by: roger deas ]
 

spyder

Member
Re: Any money down?

I have never asked for it, but I have heard of other contractors asking for 5% to bind a contract.
 

rich000

Senior Member
Re: Any money down?

I work with a GC who has a good payment history, so I am flexible with my terms with them.

However, typically

30% due upon acceptance of proposal
30% due after approved rough-in inspection
30% due after approved final inspection
10% due after final punchout
 

larryl

Senior Member
Re: Any money down?

Originally posted by sjaniga:
We have only been in business for a year now and a lot of our work is residential new homes, $10,000.00 or less, so far with most of the generals we cant get any money to start because the generals dont have it until work has started. Now that we are starting to quote more of the larger prjects, $30,000.00 and up with large contracting firms, is it normal to ask for a percentage due at contract signing, with multible billings throughout the project, as to not get caught behind the eight ball?
 

larryl

Senior Member
Re: Any money down?

IM SEEING SOME VERY GOOD ADVISE HERE,
I'V BEEN DOING THE SELF EMPLOYED THING ON AND OFF FOR MANY YEARS,
YOU AND YOUR FAMILY DESERVE TO BE ABLE TO SLEEP AT NIGHT,
I WOULD'NT DRILL A HOLE OR BANG UP A BOX WITHOUT A DEPOSIT!!!

WHEN THE GC TELLS YOU HE CANT GIVE YOU A DEPOSIT,"HE'S LYING" PLEASE DO YOUR FAMILY AND YOUR EMPLOYES A FAVOR AND DRIVE AWAY,"BETTER YET RUN"
HE WANTS TO KEEP AS MUCH MONEY IN HIS ACCOUNT AS POSSIBLE.
IT'S CALLED,
"INTREST"
I DID A HOUSE MANY YEARS AGO AND THE BUILDER WAS KILLED IN A CAR ACCIDEDT,THESE THING DO HAPPEN,
I WOULD HAVE BEEN SCREWED WITHOUT THAT DEPOSIT,
GET A 1/3 TO START!!! OR SOMETHING!!
BE THE MAN!!!!
GET YOUR $$$$!!!
GOOD LUCK,
LARRY
 

larryl

Senior Member
Re: Any money down?

IM SEEING SOME VERY GOOD ADVISE HERE,
I'V BEEN DOING THE SELF EMPLOYED THING ON AND OFF FOR MANY YEARS,
YOU AND YOUR FAMILY DESERVE TO BE ABLE TO SLEEP AT NIGHT,
I WOULD'NT DRILL A HOLE OR BANG UP A BOX WITHOUT A DEPOSIT!!!

WHEN THE GC TELLS YOU HE CANT GIVE YOU A DEPOSIT,"HE'S LYING" PLEASE DO YOUR FAMILY AND YOUR EMPLOYES A FAVOR AND DRIVE AWAY,"BETTER YET RUN"
HE WANTS TO KEEP AS MUCH MONEY IN HIS ACCOUNT AS POSSIBLE.
IT'S CALLED,
"INTREST"
I DID A HOUSE MANY YEARS AGO AND THE BUILDER WAS KILLED IN A CAR ACCIDEDT,THESE THING DO HAPPEN,
I WOULD HAVE BEEN SCREWED WITHOUT THAT DEPOSIT,
GET A 1/3 TO START!!! OR SOMETHING!!
BE THE MAN!!!!
GET YOUR $$$$!!!
GOOD LUCK,
LARRY
 
Re: Any money down?

If you are just starting out you may want to look into invoice factoring it is great if you work with a reputable general contractor, The factoring company pays you up to 75% of your invoice many times overnight and they wait the 30 or 60 days for your GC to pay the bill once they get paid they send you the remaining 30% minus there typical 2-4% fee. They set up your account regardless of your credit they are only interested in your customers credit for which they check and approve before hand and when they find them credit worthy once they never check again and pay you within 24 hours. I built my company coming from a bad divorce with no money to a multi million dollar energy and electrical contracting firm thanks to the program. The great thing is you only factor invoices you feel you need to get the money in for such as making payroll or paying off materials and think about it you get that 1-4 % back by paying your material bills quicker and receiving their early payment discount. The fact that they check your customer out also helps to protect you from bad GC's
 
Re: Any money down?

If im working for a homeowner i get 50% up front, no questions asked. Then the remainder upon inspection completion.
When it comes to GC's, I pre-lien any job over $5000.00. If your contractor has a problem with that, I dont want to work for him. Its a literal guarantee that you will see your money. He cant sell the house with a lien on it. Ive been lucky as far as collecting my money, in that I havent had any major problems, just some straggler slow payers.
 

electricmanscott

Senior Member
Re: Any money down?

I didn't know you could get a lein on a property for no apparent reason. I don't think I know anyone who would put their house up as colleteral just to have me come work there.
 
Re: Any money down?

no no, its not a lien, its a pre-lien. If things start going badly, your first in line. Talk to a lawyer about it, its actually a very good tool. I havent had any complaints yet.
I was pretty suprised when my lawyer first told me about it.
 

charlie tuna

Senior Member
Re: Any money down?

the standard asa contract form basically states "you don't get paid until the general contractor does".. if you sign this form - your screwed. especially if the gc doesn't have alot invested in the job and just drags his feet on the draws. i recently did a large data cabling job that had to go through a gc. i'm not kidding you when i say the gc didn't even know what nor where we were working. the job was completed, and we didn't see the first dollar for three months- why?? because he did not have one dollar invested in this job!!!!! if you know the guy - your lucky - if you don't - your taking a chance.. make sure you have the funds to weather the storm before you get in it - i have been in business for over twenty two years and i don't work for general contractors---they don't pay their bills!!!!
 

roger

Moderator
Staff member
Re: Any money down?

Charlie,
i don't work for general contractors---they don't pay their bills!!!
pretty bold statement.

Do you think it may be a geographical problem, I mean, look at where you are and how many "fly by nighters" just winter over and leave town, or just locate there knowing they can beat the system.

You should lobby to get a better class of GC's,
and not the Bovis's or Centex types either, they will eventually pay but not until they have pushed you around for awhile.

For fun, do a search on the Bovis exec's.

This is a real flaw with the lax licenseing laws in FL.

Roger

[ May 04, 2003, 09:56 PM: Message edited by: roger ]
 

cm

Member
Re: Any money down?

CHARLIE I feel you are 90% correct,I started business in 1978 work falls into about 3 categories ,good gc that pays his bills ,small percentage and their subs take good care of them unless the sub retires or dies you wont get them,shisters that screw everyone,and good gcs that bad custmers take down the toilet.We take care of our good ones but arent lookin to work for the guy lookin for an electrician . Difinitive my problem in pennsylvania is if the gc sighns an no lein agreement [most financial institutions require it]the sub is bound by it. hows it work in your state? Correiaelectric who do you use for invoice factoring?
 
Re: Any money down?

So, your not allowed to lien a property that a GC works on, thats subsidized by a financial institution, in PA? That sounds pretty unfair. How can you maintain any kind of leverage if someone decides to fault on an invoice?
Ive been asked to sign a lien release form. But only after the job is complete and all invoices are paid in full.

[ May 08, 2003, 01:35 AM: Message edited by: definitive ]
 

wocolt

Member
Re: Any money down?

I always get a deposit. First if I am being hired to do a job for someone I dont know, why should I start it and get it roughed in , With My Money or for that matter any job.(and then hope they pay the rough in percentage.. of course you can stop the job and wait for it but now you've invested the money for the job the labor.. for nothing plus if you take them to court you may wait 2 years to get some kind of resolution)
In 10 years I have only two prospective customers refuse to pay a deposit and I walked away from the jobs.
As somebody said about sleeping at night, and our bills are always due like anyone elses.
Overhead expenses dont go away because the customer is a little short this week.
There is this 'mantra' if you will that contractors gauge the customers, for a small business they dont see the 20,000 dollar overhead bill you have every year just to stay in business and how dare you want to make a profit on top of that.

Wm.Colt
 
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