Severe Weather Creates More Credit Risk Every Year

Severe weather and climate change events add an additional layer of risk for credit professionals, and these events are becoming increasingly more common. Everything from hurricanes to droughts, snow storms and wildfires, the weather is contributing to rising prices and payment delays. In order to prevent future losses, credit professionals must be...
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Make It a Priority to Protect Your Mechanic’s Lien and Bond Rights

Mechanic's liens are one of the strongest tools that construction credit professionals can use to mitigate the risk of nonpayment. But filing a mechanic's lien correctly and on time can be a challenge as each state has its own laws governing the steps it takes to file the lien—and those laws can change quickly.Failing to properly file a mechanic's ...
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Recession to Start Later than Expected, CMI shows

NACM's Credit Managers' Index (CMI) improved for the first time since October with a 1.1-point jump from 51.3 to 52.4. While this is a sign that a recession will likely happen later than originally forecasted, many credit professionals remain cautious, said NACM Economist Amy Crews Cutts, Ph.D., CBE.She now expects the U.S. to enter a recession bet...
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General Contractors Should Beware of Subordination Agreements

Lien waivers are critical in construction payments, and general contractors are typically required to subordinate their mechanic's lien rights to lenders. Mechanic's liens can have a negative impact on cash flow and in some cases can force double payments. With the current economic climate, construction projects have faced more hardships and compan...
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Chapter 11 Bankruptcies Are Up 70% Annually

Bankruptcy courts are getting busy as more large companies have filed for bankruptcy last month than in any January since 2010, according to Bloomberg. Bankruptcy filings were up year-over-year across Chapters 7, 11, 13, and 15 in January 2023, according to data from Epiq Bankruptcy. Total commercial filings increased 12% year-over-year, Subchapter...
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Missouri Court Case Highlights Fraud Risk in DBE Programs

Disadvantaged Business Enterprise (DBE) programs are intended to aid small businesses owned by minorities, women or service-disabled veterans. However, these programs can create holes for fraudsters to take advantage. Under the False Claims Act (FCA), whistleblowers or "relators" are provided incentives to bring complaints or lawsuits against any e...
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The Importance of Job Information Sheets for Infrastructure Projects

Infrastructure projects can be complex for a number of reasons; among them are the absence of a physical address of where the job will take place, funds from Public-private partnerships (P3) and overall higher chance for something to go awry.Scope of WorkRoads and bridges are in built in open spaces with no exact road or street name to locate them....
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Late Payments Are Rising: Should You Follow-Up Sooner?

Credit professionals have reported an increase in delinquent accounts in recent months as customers continue navigating the economic storm. 39% of credit managers say inability to pay is the primary reason for past-due accounts, according to a recent eNews poll—and the dollar amount beyond terms factor in NACM's Credit Managers' Index fell 7.7 poin...
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Virginia Ban on Pay-if-Paid Clauses Now in Effect

Virginia joined the growing list of states to ban pay-if-paid clauses in construction contracts as part of a new law known as Virginia Senate Bill 550 that amends the State's Prompt Payment Act. The ban, effective for contracts signed after Jan. 1, 2023, shifts the risk of owner nonpayment back to the contractor. Pay-if-paid language is expressly p...
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Creditors Beware of Subchapter V Filings

At some point in nearly every trade creditor's career, they will be faced with a customer who files for bankruptcy. The steps taken to collect cash from a customer during bankruptcy will depend on how the customer files. Subchapter V is a newer modification of Chapter 11 for small businesses, but it places a larger burden on creditors to collect de...
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Construction Material Prices Up 40% Since February 2020

Construction input prices declined 0.9% in November compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data. Nonresidential construction input prices fell 0.8% for the month.Construction input prices are up 11.9% from a year ago, while nonresidential c...
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Is Your Job Information Sheet Prepared for Infrastructure Projects?

Construction-oriented credit professionals typically craft a job information sheet to capture job information on privately owned pieces of property to preserve their company's right to file a mechanic's lien. They are looking to capture a physical address of a piece of property that their materials, services or labor are going to improve. But many ...
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A Fresh Look at Force Majeure for Supply Chain Fallout

It seems as though supply chain issues have been never-ending these last few years. Although supply congestion has ebbed and flowed, it remains unpredictable. "One positive thing about our current supply chain situation is that the NY Fed Global Supply Chain Pressure Index fell for the third straight month in July 2022, reaching its lowest point si...
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Lack of Skilled Construction Workers Could Cause Slow Payment

According to the 2022 Construction Business Report from Foundation Software, 37% of respondents said they hope to see an addition of skilled labor for their businesses in the next 12 months. This is up from 24% last year who had the same concern. Due to lack of qualified help, the contractor may not be able to bid on the same type of jobs or comple...
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Lien Waivers: Why should you treat them like contract documents? Because they are.

Lien waivers at their core are testament documents used primarily by title companies, banks, property owners and general contractors to assure funds have moved through the ladder of supply. Although each state is different, there are 4 basic types of waivers: unconditional partial, unconditional final, conditional partial and conditional final. For...
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The Nuts and Bolts of Indemnity Clauses in Construction

The construction process is, by its nature, an inherently risky venture. As a result, construction contracts are generally drafted to allocate such risks among the various parties to the project. These risks may include claims for personal injuries, property damage, project delays, lost profits and a myriad of other financial harms.Indemnity may be...
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White-Collar Crime Underscores Importance of Customer Verification

A federal judge in Missouri sentenced a former construction operations manager to eight years in prison for his role in a fraud scheme that won the company $335 million in government contracts for which it was not eligible.WHY IT MATTERS: According to the FBI, white-collar crimes can destroy a company, cost investors billions of dollars and erode t...
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Virginia to Ban Pay-if-Paid Clauses in Effort to Protect Subcontractors

Pay-if-paid clauses in general contracts commonly appear in the construction industry. But while these agreements protect the general contractor, they leave subcontractors and material suppliers at risk of not getting paid for their share of the work. These clauses state that "the general contractor on a project does not need to pay the subcontract...
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Rebuilding After Hurricane Ian Expected to Cost More Time and Money

Hurricane Ian made landfall in Florida last week as a Category 4 storm with 150 mph winds, just shy of classifying as a Category 5. Insured losses are estimated at anywhere from $30 to $70 billion, but it is still too soon to know the exact economic damage. Florida's tourism and hospitality sectors, citrus production and phosphate mining businesses...
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How to Analyze Repayment Ability of Construction Contractors

When lending to construction contractors, credit professionals should carefully review financial performance and cash flow. The main concerns of bankers are within areas related to how contracts are managed and how contractors expand their businesses. If suppliers who sell to construction companies are unable to receive the materials needed, it can...
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