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REVOLVING FUNDS FOR THE GENERAL CONTRACTOR

General Construction is a business of doing construction projects which entails design and estimates, building projects and remodeling or renovation. The one who is in charge of overseeing the entire general construction project is a General Contractor. A general contractor can be a public works contractor, one that does roads, highways, and government projects. A private contractor is one that engages in privately-owned construction projects like residential houses, commercial buildings, and other private institutions. The general contractor can participate in either public or private contracts depending on his accredited license. Still, all general contractors must always have ready capital as revolving funds since engaging in construction projects is very capital intensive.

The General Contractor is usually financed by the project proponent or client, so to speak, through what is called progress billing. Upon mobilization of labor and materials, the client pays 20% to 30% of project costs as down payment, succeeding payments are then billed depending on progress evaluation of the project. This is where capital for revolving funds is most needed since the supply of labor and materials is continuous, even during evaluation and other unavoidable downtimes. In most cases, the general contractor usually sources other means of capital through Mortgage Services.

There are several Mortgage Deals available in financial markets. Long term developmental mortgage, short term loans, and others, the general contractor’s best choice is the revolving fund’s mortgage. The reason for this is so that funds are readily available on demand. For example, the general contractor can’t wait for the processing of mortgage documents to pay off labor wages, which is paid weekly every time he gets short of operational funds. Likewise, some materials are cash-on-delivery basis like aggregates and concrete blocks, which are essential but must be in uninterrupted supply.

General Contractors are, most of the time, Civil Engineers by academic training. As such, they seldom use financial management as a necessary tool in running their business affairs. In taking out loans to help finance a revolving funds capital, he will need a Mortgage Advisor to assist in the cash-flow of on-going projects. Outright pay-out loans are not advisable to general contractors due to their limited ability in managing cash flow; there is that tendency to make purchases that do not contribute to on-going direct costs projects. For example, purchasing a mobile mixer or backhoe in financial management is treated as equipment capital outlay rather than direct costs. It, therefore, should not be considered as part of revolving funds capital. The Mortgage Advisor can then advise the general contractor that only labor, materials, and other allied services contributing to the particular on-going project can be included. In other words, a loan account under a supervised credit arrangement for revolving funds capital is what is needed best by any general contractor.

Capital outlay for equipment, mobile vehicles, and other power tools and services must be treated in another loan account separate from a revolving funds capital. The Mortgage Broker can come up with a new Mortgage Deal.

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