On today’s show we are talking about a very real risk that is affecting real estate developers and property owners alike.
It’s always been a risk that a contractor might go out of business. Sometimes contractors allow themselves to get upside down financially. This can happen for a variety of reasons. Sometimes it’s the result of a client not paying them in a timely manner which causes a cash flow problem. Sometimes it’s the result of poor financial management. The contractor keeps trying to get new business to keep the lights on. By the time they realize that they’re out of cash, they start robbing from one project to pay another and the downward spiral begins.
The problems are not confined to contractors. In fact, we are currently seeing problems at subcontractors more frequently. In the past day, I’ve heard of several subcontractors who are in financial difficulty. Fortunately, none of our projects have been impacted or affected. But the risk is always there.
When a subcontractor is in the throes of going bust, they will often ask for advance payments to procure materials. You will also see unexpected delays in supply of labor and materials arriving onsite.
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