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Subcontractors Getting Ripped Off by Contractors

Subcontractors Getting Ripped Off by Contractors
Brutus - Tue Mar 27, 2012 @ 03:44PM
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If you are a subcontractor and you don't want to get ripped off by your contractor, make sure he has money in the bank and hasn't been getting sued by a million vendors. Do a contractor check. Make sure he's got money. The construction business is really rough these days and so many subcontractors are just going belly up, especially since the residential housing crisis, and they can't expect a contractor to watch out for their best interests. After all, the contractors are going under too. So many of them aren't even making payroll, are selling off equipment, or are otherwise fighting with their banks because they've maxed thier credit lines or violated their covenants.

Anyway, the smartest thing to do is get money down before you procure any materials. A lot of contractors will tell you you can't have money down because they only pay for completion, but that isn't true. They just have to get their CFO or controller to cut a check. So, if you are a small subcontracor and only have a $300k job, when the Contractor's job is $10m, it really isn't that big of a deal to give you a 50% down payment. You can't always get money down, but it doesn't hurt to ask. Also, if you don't get any money down, ask if you can be paid immediately for the value of materials, right upon submitting proof via purchase orders.

Some of the ways to do a contractor check:

1. Get a D&B report

2. Ask for financials

3. Ask for proof he's got room on his credit line, or cash in the bank to pay you.

4. Ask around and see if you can find some subcontractors who've done business with the Contractor before.

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