4 Ways Materials Financing Can Help You Recession-Proof Your Business

Construction worker surveying construction materials on a construction site

Managing cash flow in the construction industry is difficult in any economy, but during a recession, specialty contractors face even more financial challenges than usual. 

During the Great Recession, more than 150,000 construction firms closed their doors, and 2 million construction workers lost their jobs. One of the most significant challenges during that time was the lack of financing for commercial construction companies.

At Levelset, we understand the construction industry and the importance of cash flow security for specialty contractors. That’s why we’ve built Materials Financing to empower you to buy materials now and pay for them later with up to 120-day payment terms. 

Increasing your business’ cash flow will take a multi-layered approach, especially when a recession is on the horizon. So, in addition to financing your materials with extended terms, you may want to explore the following to lower financial risks across the board:

As you prepare for the impacts of a possible recession, such as unstable interest rates and increased cash flow gaps, using low-risk financing for your materials and strengthening your business from the inside out is a winning combination to keep your projects moving forward and your business secure.

Let’s take a deeper look into four ways Materials Financing can help free up capital and recession-proof your business.

Increase working capital with longer payment terms 

The ability to increase your working capital could be the difference between taking on bigger jobs and being unable to fulfill the jobs in your backlog. With up to 120-day payment terms, Materials Financing allows you to push your material payments out and increase your working capital to run your business more efficiently. With longer payment terms, Materials Financing will empower you to use your cash to pay for necessities like payroll, utilities, equipment, and insurance instead of pouring it into upfront material costs. 

Influent Energy, a Kansas City-based solar company, saw an increase in its working capital with Materials Financing. Jessica Oakley, Influent Energy CEO, started using Materials Financing after a boom in business required more cash for solar modules, payroll, and other operational expenses. Once she started financing materials rather than paying for them out of pocket, she maximized Influent’s ability to cover payroll and operating expenses. 

Influent Energy started jobs faster using Materials Financing than when they relied on cash sources like bank loans and has financed materials on nine projects with Levelset since June 2022.

“Materials Financing has leveled out our highs and lows and enabled us to have a more predictable and balanced cash flow and workflow,” said Oakley. “I’m not scrambling to find money to make payroll at the last minute. There’s more certainty in our business outlook now.” 

Take on more projects

Materials Financing helps you take on more jobs because you no longer need to have cash on hand to cover the cost of new jobs, and you can finance materials on multiple jobs simultaneously. 

According to an Associated Builders and Contractors (ABC) survey from August, its members reported an average construction project backlog of 8.7 months, despite the threat of a recession. There’s plenty of work to go around! 

Yet, most specialty contractors don’t have enough cash on hand to start work on more jobs and need help accessing funding from the bank needed to start projects. During a recession, the requirements to qualify for traditional funding become even more strict, complicating an already difficult process of getting approved for the money you need to take on more projects.  

Materials Financing gives you faster results than other forms of financing. Approval can happen as quickly as 24 hours. Plus, you can repeat the process as often as you’d like to keep up with the commercial construction boom. 

“Materials Financing is simple,” said Alberto Polanco, CEO of Polanco Business Solutions. “After approval, I sign the contract and send an invoice for the materials. Levelset executes in 24 hours. I like that the process is straightforward.” 

As you recession-proof your business, Materials Financing can help you take on more projects as you build up your company’s revenue and reputation.

Diversify your distributors

Materials Financing can help you strengthen your vendor relations and expand your material supplier network. When the economy is unstable, suppliers also face difficult times. They may alter their credit terms and conditions if forced to cut costs. Some suppliers may provide fewer material options, limit who qualifies for credit by tightening requirements, or in worst-case scenarios, shut down. But you can prepare for these obstacles by expanding your supplier network.

With Materials Financing, you can work with any supplier — and that supplier gets paid on day one. This eliminates credit risk for suppliers and reduces their DSO, leading to better customer working relationships. Having a competitive edge over other contractors is priceless during a recession. When you use Materials Financing, your suppliers get paid faster, which could lead to future discounts and expedited delivery times.

Materials Financing empowers contractors to strengthen relationships with current vendors (they get paid faster!) and start strong relationships with new suppliers. Diversifying your supplier network provides security in acquiring the materials you need for your jobs, despite challenges that may arise with a specific vendor.  

“Now, when I call my vendor, they are very happy because they get paid right away,” said Alberto Polanco. “It’s just wonderful because now that I have Levelset to finance my materials, I’m secure.”

Build a stronger team

Since Materials Financing provides extended payment terms, you can use your working capital to invest in your team as you prepare for a recession. With more cash in your business, you’ll be able to cover payroll and keep your team employed during turbulent economic times.

Hiring enough skilled workers is already difficult with industry-wide labor shortages. Yet, having the right team members to fill the right roles can eliminate the worry of whether or not your team can fulfill projects on time. Another benefit of having a skilled team is that it allows you to focus on getting more bids and growing your business instead of doing on-site work.

“We added 10 new roles that we’d probably have delayed until we were further along if we didn’t have an increase in cash flow availability since using Materials Financing,” said Oakley with Influent Energy.

Get prequalified for Materials Financing

Freeing up capital is more important than ever as the construction industry braces for a recession. Materials Financing is low-risk and provides 120-day payment terms. Find out if Levelset can buy the materials you need for your next job. Get prequalified today.

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