Most contractors working in commercial construction projects pay for materials well in advance of receiving payment for their labor. Indeed, 74% have terms with their suppliers of 30 days or less, but the time they wait to be paid for their own work averages around 85 days. It is therefore probably not surprising that 46% of entrepreneurs are struggling to make ends meet with such a lumpy cash flow.
Faced with this imbalance, the construction materials financing specialist Invoice and industry software company Procore have teamed up to create a new program for commercial contractors that quadruples the payback time for supplies to 120 days.
“It has always been a dysfunctional part of the construction where the subcontractor is the most affected”, Chris Doyle, CEO of Billd, told PYMNTS when explaining the problem his company aims to solve.
In their official announcement On September 8, Billd and Procore said the financing program not only helps contractors by giving them access to upfront funds, but also allows suppliers to sell more materials with less risk. Together, they said the goal is to offer contractors a complete solution to secure financing for critical projects, while helping to streamline project management and materials sourcing.
Transparent information exchange
Users of the Procore software will now be able to access funding through the platform and integrate their projects with Billd’s own site. “It’s basically an integration between the two platforms,” Doyle said.
In short, Procore users and Billd customers who use Procore will be able to seamlessly exchange project information and gain greater access to purchasing power to purchase materials.
Since Billd makes decisions based on projects, Doyle said the ability to more easily capture information about a job will allow him to offer increased purchasing power to the entrepreneur. “Like any lender would, if they have access to more information about the customer, they are able to take more risk,” he explained. “It’s the same for us, alleviating the burden on the entrepreneur of necessarily providing this information. “
A long-standing challenge
Historically speaking, Doyle said contractors have typically coped with long payment terms in the construction industry by keeping a war chest on hand, handling different supplier terms – or worse. , by simply being constrained and unable to grow. “There haven’t been a lot of companies that have come out and tried to do something, at least from the bottom up,” he said.
Billd is able to provide 120 day conditions as he is vertical focused and has created a variety of proprietary industry specific analysis tools to assess risks in the construction industry. Traditional credit metrics are poor predictors of risk in this vertical segment.
“Traditional banks, for the most part, are unfavorable in the building space,” Doyle said. The time it takes for contractors to get paid is unpredictable, varying from project to project. It can be 10 days, 30 days, 60 days or 100 days. However, they must bear all the costs of the project. “These characteristics or innate attributes of the company are not attractive to [traditional] banks, ”Doyle added.
At this point, entrepreneurs only need to submit standard contact information on an application, which takes five or 10 minutes, before Billd does his due diligence. Regarding the refund, Doyle said it was “fairly standard” and made exclusively through ACH.
While their building materials financing partnership is new, Billd and Procore are already thinking about new ways the two companies can combine their technology and expertise to provide additional services to contractors.
“We have taken a number of milestones in the partnership, and a lot is on our radar to continue to grow,” said Doyle. “We are only at this first step and look forward to growing and delivering more value to our mutual customers. “