Having funds available required to “mobilize” for an upcoming project is a primary challenge for a growing construction subcontractor.
This begs the question of “Is there a non-bank funding solution that can help me take on additional profitable projects?”
Fortunately, the answer is “Yes!” The mobilization funding solution is designed to help profitable subcontractors grow by providing the funding required for additional profitable projects.
It provides the capital required to fund the upfront costs of a specific project. Relying on the payment of the retainage from the last project to cover your early expenditures restricts your growth. Mobilization funding can provide the capital to address these upfront capital needs, allowing you to take on additional profitable projects. Additionally, a borrower can receive mobilization funding for multiple concurrent projects.
What can the funds be used for?
Funds borrowed under this type of program can be used for any job-related costs incurred for the specific project. This includes labor, supplies, equipment, insurance, permits, etc.
Funding can commence at any time after a contract is awarded.
The level of available funding:
During the underwriting process, the borrower and lender develop a weekly project cash flow model for the applicable project. This model determines the level and timing of the borrowings (and repayments).
This cash flow model is reviewed weekly, and funding and repayment schedules are adjusted to reflect any changes in project payment levels and timing.
Borrowings are limited to 20% of the project’s value.
The timing:
The process typically takes approximately one month from the initial call to funds disbursement.
This timeline heavily depends on how quickly the prospective borrower can complete their application, develop the cash flow model, and execute the loan documents.
On an expedited basis, borrowers can go through our processes in as little as two weeks.
The first loan approval process is the longest. Once the lender has gone through your business’s initial underwriting and formed that relationship, the second, third, fourth, and fifth loans can be approved in as little as one week or less.
The cost:
Completing and submitting the application, developing the project’s weekly cash flow model, and undergoing the loan approval process costs nothing.
When the facility is approved and the project gap funding loan facility is established, an origination fee of 5.5% will be charged based on the facility size. Additionally, interest will be charged based on the outstanding loan balance. Our daily simple interest rate is 0.158%, which equates to 4.75% monthly on the outstanding loan balance.
For example, a $400,000 advance on a $2 million project that had been outstanding for three months would involve an origination fee of $22,000 and interest of $38,000, or 3% of the overall project.
Borrowers typically work with the lender to model the cash flow and calculate the borrowing cost prior to their bid and incorporate this cost into their bid.
At Glengarry Capital Group, we seek to provide innovative financing solutions to help successful middle-market businesses grow. To this end, we have relationships with lenders who have developed specialized funding products and processes to support the construction industry. The above-referred mobilization funding solution is one of those solutions.
Contact me at [email protected] to arrange a time to review your situation and explore the funding programs available to you and your construction business.