When a General Contractor or Client Pays Late: Texas Business Funding

Why subcontractors feel it most

Subcontractors and suppliers sit at the bottom of a payment chain. The owner pays the general contractor, the general pays the subcontractor, and the subcontractor pays crews and suppliers. A delay anywhere above is felt below, and the person at the bottom has the least cushion. Crews are paid weekly regardless, so a 60-day wait means funding two months of labor from your own account.

Two tools to know about, with a caution

This is general information, not legal advice. A Texas attorney can tell you how it applies to your job.

• Interest on overdue amounts. Texas Property Code section 28.004 provides that overdue amounts accrue interest from the day after the due date at 1-1/2 percent per month.
• Lien affidavit. Under Property Code section 53.052, a lien affidavit is filed with the county clerk. For a non-residential original contractor, the deadline is the 15th day of the fourth month after the month the work was completed.

These deadlines are strict. Missing them can mean losing the tool entirely, so ask early.

Build a collection timeline

Having a routine is useful because it makes late payment a process rather than a confrontation.

Protect yourself on the next job

1. Get a signed contract with payment terms before starting.
2. Ask for a deposit or progress billing so you are never far ahead of the money.
3. Check how the general contractor treats other subcontractors.
4. Limit the share of your revenue that depends on any single client.

Choosing which clients to extend credit to

Not every client deserves the same terms. Before taking a large job, ask for references from other subcontractors, check whether the client has a history of disputes, and decide the maximum amount you are willing to have outstanding to any one customer. For illustration, one client making up a quarter of your revenue is a larger risk than five clients who each make up a small share. Reducing exposure to a single slow payer is often cheaper than financing the wait.

Bridging the wait

For illustration, an invented electrical contractor with a $45,000 invoice outstanding for 60 days and $18,000 a month in crew costs has paid roughly $36,000 for that wait. These are round figures, not our terms. Working capital pays crews and suppliers while the invoice runs its course. We fund $25,000 to $5,000,000, with funding in as little as 24 hours. The application takes about five minutes with a soft credit pull, and sole proprietors can apply. When you are ready, start your application.