Who’s on the job? Why job information matters

In construction credit, money is flowing down the ladder of supply and material suppliers and service providers selling to subcontractors are vulnerable to delayed payments—or worse, not getting paid at all.  The critical first step in effectively managing construction credit is gathering and verifying job information, especially identifying everyone involved in the project.

Why it matters: Overlooking those involved in the project during the early stages can be risky, especially when forgetting to notify key players of a preliminary lien notice can compromise a creditor’s ability to perfect a mechanic’s lien. While not every state requires creditors to notify the lenders on the project when filing prelien notices, it’s best that credit managers know who is involved to protect their company from risk.  

“In a lot of states, you are required to notify your subcontractor, customer, general contractor, owner and lender when filing preliminary lien notices,” said George Demakis, corporate credit and pricing manager for Stone Group of Companies (Spokane, WA). “If you don’t notify the lender, you could potentially lose your lien rights with respect to that lender, so in the event that the lender takes control of the project or refuses to pay, you would have no recourse against them. Even in states where it’s not required, it’s a good idea to let the lender know you’re involved so they’re aware there’s someone providing materials that could file a lien on the project.” 

The best defense against losing lien rights is being proactive about gathering pertinent information. “Our practice is to obtain all job information at the beginning of the project,” said Deana Reynolds, director of credit for Edges Electrical Group (Sacramento, CA). “This is not only to ensure our notices go out with all the information within 20 days of the start date, but also because if we open the job and allow purchases on it before getting all the info, the customer doesn’t have the incentive to get that information over to us in a timely manner.” 

It can be challenging to determine everyone involved on projects, especially when other key players in the project are withholding information, but credit managers can find creative routes to ensure they’re fully informed. “If you are a supplier, don’t be afraid to go directly to the general contractor to ask for the job information,” Reynolds said. “Often the prelien information will come to us with an architect listed as well, and they can also be a good resource. With that being said, my best advice would be to make sure you have some outside sources available for verification.”  

The tenets of knowing your customer extend to several parties when working on a project, making maintaining relationships with key players an important part of a well-rounded approach to construction credit. “Whether it is the owner, the lender or even the bonding company, you want to be able to pick up the phone and call those people at any time to get an update,” Demakis said. “Whether you are looking for an update on the status of funding or a bond, it can be helpful to have everyone’s contact information in case the general contractor isn’t getting back to you. The more information you can get upfront, the better.” 

The bottom line: As always, it is best for credit professionals to be as informed as possible on the project they are working on and who else is involved in the project. Without full job information at the onset of a project, credit managers risk losing lien rights after failing to properly notify all key parties, leaving their company vulnerable to loss.