SITEWORK CONTRACTOR DEVELOPER SLOW PAY — CONSTRUCTION LOANS, PAYMENT CYCLES, AND LIEN RIGHTS.
A sitework contractor working for a developer has a structurally different payment risk profile than one working for a commercial GC. The payment flows through a construction loan draw process that adds 15–30 days to the cycle. The developer’s financial pressure becomes the contractor’s cash flow problem before it becomes anything else. And lien rights — the primary protection — must be preserved from day one, before the slow pay starts, regardless of how solid the relationship seems.
SPM models developer payment cycles at their realistic length in the 13-week cash forecast and implements preliminary notice protocols on every developer project from engagement start.
DEVELOPERS VS COMMERCIAL GCS — THE CASH FLOW DIFFERENCES THAT MATTER.
Developers Often Control the Construction Loan Disbursement
When a sitework contractor works for a developer rather than a commercial GC, the payment structure often flows through a construction loan draw process. The developer submits a draw request to the lender. The lender inspects or approves the draw. The lender disburses to the developer. The developer pays the contractor. This four-step process adds 15–30 days to the payment cycle compared to a commercial GC with a direct accounts payable process. A net 30 contract with a developer who runs construction loan draws becomes effective net 60–75 in practice. Model the realistic payment cycle, not the contract payment terms, when assessing working capital requirements.
Developers Under Financial Pressure Slow Payments to Contractors First
Developers who are managing tight construction loan budgets — carrying costs exceeding projections, presales below target, market delays — slow contractor payments before they slow any other obligation. Contractor payments are the most deferrable item in their cash flow. Unlike loan interest, which triggers technical default, and unlike lender inspection fees, which cannot be avoided, contractor payments can be deferred with a phone call and an apology. The sitework contractor is the most exposed because they are typically the first trade on site and carry significant mobilization cost before any payment is received.
Mechanics Lien Is the Primary Protection on Developer Work
On developer-funded sitework, the mechanics lien is the primary protection against slow payment and nonpayment. The lien attaches to the property — which the developer cannot sell without a clean title. The lien right must be preserved from day one: preliminary notice sent within the required window (varies by state), lien filed within the lien period if payment is not received, and the lien enforced through the claim period if the dispute is not resolved. Most sitework contractors on developer work never send preliminary notice because the relationship seems solid. The relationship does not change the lien right requirements.
FOUR SPECIFIC ACTIONS FOR DEVELOPER-FUNDED SITEWORK.
The LOC implication: Sitework contractors who primarily work for developers need a larger LOC relative to revenue than contractors who work for commercial GCs. The longer payment cycle and higher advance rate of developer projects require more working capital per dollar of contract value. Size the LOC to fund the realistic payment cycle on the largest developer project in the portfolio.
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