Why Project Finance Is Good For Small Contractors Not Bankers

 In Project Finance

You don't need a lucky charm to win contracts...

You don’t need a lucky charm to win contracts…

A local, state or federal government contract is a great thing to win. You’re guaranteed payment. It’s money you can literally bank on. That is, when you finally get it!

It’s an expensive game to play, especially for contractors and subbies working in civil and construction.

You need cash to tender. You need cash to buy materials. You need cash to pay wages, insurance, equipment hire, suppliers…

You also need cash to bridge the gap before first payment and then between further progress payments – 60, 90, 120 days.

The combination of erratic weather and a looming federal election hasn’t done the civil and construction sector any favours. Most large contractors have the resources to weather both climactic and political storms, but for the medium to lower tiers it’s a different (but albeit familiar) story  – cash reserves are so low that government contracts are quite simply beyond their scope…UNTIL NOW!

As I claimed above, it’s an expensive game but one where the good credit of the entity ordering the service (i.e. a government agency or department) can be used to finance the contractor. All you need is a router, which would be us, to filter and direct financial resources. Hold on, I’m getting ahead of myself.

First, we can help in the tendering process. A bad credit history, weak balance sheet and/or lack of capital reserves can put you out of the game before kick-off. So don’t let it! We can provide you with the financial surety to go to tender.

Next, we can provide you with the mobilization and working capital funding necessary to properly execute these public works projects. The nightmare of waiting for progress payments need no longer haunt you.

Further to this, we also have partners onboard that can assist with insurance, payroll as well as other ancillary financial and administrative support services. These can be seamlessly integrated into any offering upon request.

The frightening thing about all this is why the hell didn’t someone think of it before. Why should builders have to be bankers? I wouldn’t ask an economist to build me a bridge, so why should contractors be expected to spend over 50% of their time crunching numbers?

As far as I know (and I know far), AR is the only provider in Australia that offers this service.

So if you want to find out more, your choices a pretty limited, but certainly a lot better than yesterday.

The alternative is going back to the bank and extending your line of credit…if you can, and besides who wants to go there anyway?

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