Checklist for Contractors To Survive Coronavirus Impacts
You can survive and thrive in the face of all the economic and performance challenges. It’s important that you don’t make deadly mistakes. Here is a checklist that you should consult with your team to survive in the difficult year ahead.
1. Inventory & address immediate legal issues
Your business has immediate legal issues and challenges to address – and you want to get on top of these right away.
You have live jobs and live construction contract obligations. It’s important to do an inventory of these to make sure you’re protected against negative impacts encountered in the next few weeks. Or ones already at your doorstep.
Here are some examples:
- Notice provisions: Many contracts require you to give notice within a very short time period in the event of any delays, change orders, etc. And courts are known to strictly enforce these! Get your notices prepared for any jobs that are delayed, any materials that are impacted, etc. Learn more in our Complete Guide to Construction Notices.
- Are your contracts voided? Can you void them? Many contracts have provisions in them that contemplate “acts of God.” These are called force majeure provisions. Read them. Understand how delay provisions may affect your rights and obligations during an epidemic.
- Create new agreements: It’s in everyone’s best interest to get ahead of potential disagreements. In this helpful Building.Uk article, it’s suggested to “write [and agree on] appropriate provisions…so reasonable precautions are taken to prevent the spread of diseases,” among other things.
It’s a good idea to consult with a construction attorney on this stuff. We’re offering Levelset users a free consultation with a construction attorney to prepare for surviving and thriving despite the coronavirus.
2. Get strict about protecting lien rights
It’s time to get strict about protecting your lien rights.
Whether you get paid, and when you get paid, is now dependent on tons of things out of your control. Don’t get caught by a stray bullet here. You want to pay attention to 2 simple things.
On All Jobs: Send a Preliminary Notice
Preliminary notices are crucially important to protect you against payment problems on a job….especially problems that are not your fault.
In 2020, it’s highly likely that you’ll encounter jobs and payments that are delayed. It’s highly likely that you’ll encounter other contractors who have significant cash stress and/or file bankruptcy.
When you encounter this stuff, you will be left holding the bag if you didn’t send a preliminary notice. You will have a payment problem in 2020. If you don’t send preliminary notice…you’ll get stiffed. If you do send your notices, you’ll likely be fine.
You will have a payment problem in 2020. If you don’t send preliminary notice…you’ll get stiffed. If you do send your notices, you’ll likely be fine.
On Jobs When Payment Is Pinched: Pull The Trigger!
If payment begins to drag on any of your jobs you want to have an itchy finger. Pull the trigger and escalate the matter to protect your rights. This means sending a notice of intent to lien, and/or filing a mechanics lien.
In normal circumstances, many are willing to give your customers and other participants more time.
Construction contractors need more caution in the current environment with coronavirus.
You don’t want your own cash circumstances to put you out of business. Pulling the trigger early is the fastest and most certain way to keep your cash coffers full.
Also, you don’t want to lose your payment rights. It’s important to pay close attention to your lien deadlines and to take action with enough time.
In today’s environment, county recorder offices are closing and limiting their availability. Mailing systems are stressed. And more. Don’t wait to protect your important cash and payment rights. Find out how to file documents remotely when your county offices are closed.
3. Monitor your general contractor’s payment behavior changes
The general contractor on your job is going through a major disruptive event with coronavirus. They will struggle with the project schedule, with legal disputes, with worker shortages, and with cash.
It’s important to keep close watch of the general contractors on your job.
- Have you seen an increase in payment problems?
- Are they starting to pay contractors more slowly?
- Did you notice retainage practices changing?
This is a great time for the best general contractors to shine. But, it’s a very trying time. It’s important that you monitor your GCs because their behaviors will directly impact your business and whether it survives.
4. Increase your cash cushion
Economist Anirban Basu, from Sage Policy Group, has great advice for contractors: “raise cash, determine if lines of credit are large enough, consider staffing models, and ensure the good graces of bankers and insurers.”
Cash is king. Getting access to cash and managing cash is extremely important.
Here are a few things that can help.
- Working capital loans: Take quick action to apply for working capital loans…even if you don’t need it right now.
- Buy materials with longer terms: You should take advantage of programs, like this one with Levelset, that lets you buy materials with longer payment terms. This will help your cash needs on jobs throughout 2020.
- Get cash from slow-paying accounts: Most contractors live with slow-paying jobs on the books. Try to change these out for cash now. Levelset can inspect these accounts and see if they are eligible for quick cash.
- Keep an eye out for SBA Loans: The SBA is preparing loan offerings for contractors impacted by the coronavirus. Jump on this and get cash for your business.
Protect Your Business.
While the ultimate impact of coronavirus / COVID-19 on construction is unknown and speculative, a few things are certain:
- The virus is having and will continue to have at least some negative effect on the global economy
- Construction companies will experience extreme cash stresses
- There are ways to protect your business and come out alive
Article Source Click Here written by Nate Budde