In the construction industry, the term “mobilization” refers to the effort and expense involved in getting a project started. Some common examples of mobilization tasks might include scheduling crews, securing permits, establishing a site office, arranging transportation, renting or buying equipment, buying materials, and even back office support.
All of this advanced preparation requires funding and has to get done before work can commence. Especially for newer construction businesses, it this first project phase that tends to generate the most cash flow problems as, typically, mobilization costs are not recouped till long after they are incurred. Without funding these initial steps, the construction businesses are unable to make progress, will struggle to meet performance marks and therefore will not be able to bill out for and obtain progress payments.
That makes mobilization a common source of construction cash flow problems especially for new businesses that haven’t had time to develop cash reserves and might lack experience writing contracts and selecting the best financing options. Sadly, some construction businesses even turn down projects and opportunities for growth simply because they lack the funds to get started and can’t manage cash flow until they do.
How to Plan for Construction Mobilization Funding
Capstone is an expert with construction financing and knows how to help our clients obtain the money they need for all stages of their projects. A good strategy for managing cash flow and obtaining financing for mobilization typically starts by developing a construction mobilization plan.
This mobilization plan can include an overview of:
- Necessary personal, equipment, and resources
- Permits, licenses, and other regulatory requirements
- Funding needed to complete all the mobilization tasks
- A schedule with key deadlines and performance targets
First, this plan should serve as a useful resource to set budgets, compile cash flow projections, and schedules to keep work on track during the mobilization phase. Even the process of developing the plan should improve efficiency by helping planners account for possible obstacles early and ensuring they can get the job done within the customer specifications. Even more, the plan can serve as a tool to help obtain quick funding to manage cash flow during the mobilization phase.
Account for Mobilization Efforts Within the Contract
The mobilization plan should serve as a framework to explicitly account for mobilization costs within the project contract. Ideally, negotiating a mobilization clause into the contract will demonstrate the kind of good planning and transparent communication that prompts customers to agree to advance a mobilization fee (or deposit) to fund these necessary expenses.
Customers will see a schedule of values with mobilization costs and understand that their construction partner needs funds to get started. While the customer might not offer to write a check as soon as they’ve signed the contract, the terms of the mobilization clause can allow the construction company to generate an invoice or payment application for a mobilization advance fee.
Even so, construction companies might need to wait an additional 30, 60, or even 90 days for payment from their customers. Rather than waiting for payment on the invoice from their customer, the construction business can present it as documentation to apply for Capstone construction financing. This gives the construction firm the ability to convert their invoices or progress billings for mobilization into immediate cash flow through invoice factoring. It also allows businesses to offer their own customer’s payment terms and still enjoy rapid funding for their efforts.
How Does Capstone Construction Financing Work?
Capstone unique approach to construction financing helps their clients get projects off the ground rapidly and with access to adequate financing. Rather than having to apply for and then assume more debt, the construction company simply factors the customer invoice for the agreed-upon advance rate.
With this kind of funding, called construction invoice factoring, the construction company receives money quickly, and Capstone takes on the responsibility of collecting payments for invoices. Unlike most invoice factoring companies, Capstone has the unique ability to accept invoices or payment applications for mobilization and knows how to close these deals.
The simple funding process works like this:
- Once Capstone verifies the invoice with their client credit worthy customer, they are able to provide funds right away.
- After the customer pays the invoice, according to the invoice terms, Capstone will send along any remaining reserve funds after taking out their factoring fee.
Even more, as the project moves forward, clients may ask Capstone to advance more of their invoices; however, they don’t have any obligation to. This flexible approach leaves construction companies free to ask Capstone for immediate funding when they need it and pass on it when they don’t.
How to Work With Capstone for Fast, Flexible Construction Financing
Working with Capstone means construction companies don’t have to turn down projects of opportunities for growth because they lack the financing to get started. Instead, invoice factoring gives them the chance to take on more work because they won’t need to wait to get paid and in turn, use their funds to manage cash flow.
Take a moment to learn more about Capstone construction funding opportunities. Call or email us at any time to have a conversation with one of your experienced financing representatives or apply online.
