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09-11-2012, 02:58 AM #1
- Join Date
- Feb 2011
Financing a contract.
So, I have been bidding many state and federal mulching jobs but my biggest hang up is funding the project. I have succesful experience on contracts as large as 500 acres and as small as 45 acres. I have typically funded the previous projects out of pocket or borrowed seed money from family in the past but the way my tree business has been this year leaves no capital to fund a large contract if awarded to me. I habe no experience but do understand the principals of invoice factoring and generally do recieve progress payments but neither are suited to my main issue which is funding the initial mobilization and startup costs to be able to generate an invoice. Banks are out, they take too long to ultimately decline funding as we are already in mulching season and most solicitations have already went out. Ultimately, I would be in need of 50-75k for startup to fund the projects larger than 1000 acres. How do you folks fund these large projects?
09-11-2012, 08:10 AM #2
- Join Date
- Nov 2010
- Buckner MO
- 2005 Kubota L5030 GST; Farmall 706
Well, I say you must have a large pair of stones on you....bidding all of this work not knowing how you could pull it off if awarded the work. Don't know if I admire or despise that
With a business plan, including financial reports prepared by a CPA, you might get a revolving line of credit from the bank. Or, personal loan / home equity loans might be an option.
There are also "factoring" companies - those who buy your A/R at a discounted rate. I have never used them, but have gotten marketing info from them in the past. Expect to lose 5-10% as their fee. (think collateralized loan sharking).
I suspect though, you will be forced to go to the GC with your problem, and try to work out the details with them. They could purchase the materials for you. Or make a quick pay on your invoice. You will probably lose a good deal of your profit, but like I always say "Any port in a storm" (a favorite saying of the fictional Dirk Pitt character).
Are you by chance minority, veteran, service disabled or is the business women owned, located in a hubzone? If so, the GC will be more apt to work with you so they can meet their contracting goals.
Edit) I suppose you could look for an angel investor or business partner...neither a good option in my opinion.Dean
09-11-2012, 08:48 PM #3
- Join Date
- Apr 2011
- ford ,JCB , International .David Brown, White, Cat dozer
Re: Financing a contract.
get yourself a good line of credit with financial body that way you have a repay advance loan all the time ,,,,,,, interest rates can be fixed or varied depending on what you view as satisfactory
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