# RBC Bank won't release 1st insurance draft until roof is completely installed!



## MyRoofGuy (Feb 3, 2011)

RBC Bank in Rocky Mount, NC won't sign off on first insurance draft until roof is completely installed... can they do that? Anyone ever deal with this before? All advice is appreciated, thanks!


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## Grumpy (Oct 29, 2008)

The customer pays me. I don't give a chit where they get their money. I seldom ever start work without a check in my hand and signature from the building owner or owner's authorized represenative. 

Having said that, alot of commercial doesn't like to give down payments. Depending on the size of the job I may or may not accept the job bsed on the risk. I recently did a job that I would consider small for commercial, with 30 days terms. It was only an $8k job, so worth the risk. As a matter of fact I am going out to look at some other sections on their complex tomorrow, but I digress. I did a $200k job a few years ago, got 25% at signing and 25% at material delivery. The point is there is a difference in my comfort level based on the size of the job. 

When I used to do new construction, very few GC's would give a down payment. If it were our first job together I absolutely wouldn't take on a job without a down payment. If they ever got late on their payments, I cut them loose. But that's a big part of the reason why I stopped doing new construction before new construction stopped. 

If it's not within your comfort level then tell the building owner they need to fork up the down payment. Again what are their terms? If they agree to pay you 100% within 15 days of completion, can you manage that? On a typical residential I probably could manage that depending on how hungry I were for work. 

What are their terms for final payment? Do you really NEED the down payment? If you do then obviously tell the bank you can't start without it. If you need it for materials tell the bank to pay your supplier direct. 

Is it legal? Absolutely, well maybe, I would think. Afterall when you think about it the bank probably really owns the building.


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## Ed the Roofer (Sep 15, 2008)

Your contract is with the Home Owner or Building Owner.

They owe you the money. The insurance company and the bank in turn owe the property owner the money they are holding, after they have covered their azzez.

Ed


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## Grumpy (Oct 29, 2008)

That's exactly the way I feel, Ed.


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## VermontRoofing (Mar 19, 2011)

This kinda situation is routine when you are working for a GC, insurance, third parties, and/or commercial jobs etc... So it is a fine line where you need to exercise caution on your behalf to do whats right for you.

When entering into these contracts you have to ask yourself if you can afford to obtain materials, pay the labor, and then wait 30/60/90 days to receive payment. These companies are good for promising the check will be the mail and then their was an error in the office or your billing address etc... 

This may be a burden on a business and if payment is expected in 30 days and does not come for 90 can flat out halt your business if your lines of credit run dry in between, you cannot afford to continue paying your labor, and/or both.

Sometimes these are great opportunities especially for a business that is looking to expand, but it has to work for your business not hinder it. Unfortunately sometimes you may have to pass on a project to a business with deeper pockets.

Most importantly, ask yourself can you afford the loss if the check does not ever come.

I agree with Grumpy and Ed on this and we usually look to receive a third before starting on larger projects with a 2nd payment after an agreed phase is completed and realize that can still take weeks for approvals, paperwork, and mailing time. 

This can halt a job if funds are not available to continue, so be prepared to continue working past that the first phase before actually receiving payment. If your contract has set deadlines to meet, the lack of cash flow halts production, and you miss the deadline because they did not make the funds available it is possible you could end up being further penalized for missing theses deadlines. This type of thing bankrupts a small business involved in a large commercial project, developers, and home builders taking all their initial investments down with them. You can enter a project with a good business, money, work hard, and leave bankrupt when you swim with the sharks.

Don't jump into deep water chasing hundred dollar bills if you can't swim.

On smaller residential jobs I receive 50% at the very least the day the shingles are delivered, but I am more comfortable receiving this in advance because realize you can have your bank release funds into your account and that roof laid before the bank actually processes the check 5 days later to verify the check was no good. Now your account is in the hole, you cannot take the materials back, and labor expense has been paid out of your pocket.

I have done this in the past and been paid, but a few times it has become a situation where I have handed control over to someone else, and one time I was required to do a lot of extras to get that check because they knew I would do it just to get paid.

Hope this helps even though it strays from the point a little.

Chittenden Buildershttp://www.shakehandsonline.org


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## Grumpy (Oct 29, 2008)

If you know up front you have to wait 90 days for your money, I encourage you to raise you rprice on the grounds that you are likely pricing the job based on cash or 30 day net price. When you have to start paying juice, you have to factor that juice into your cost. Most banks, insurance companies and contractors will tell you they don't pay finance charges. So these charges have to be marked into your costs as well. 

furthermore if you need to take a short term loan to cover labor, or you have a line of credit with your bank and forsee you will have to utilize it, again you must mark any fees or interest into your cost because you likely won't get it on the back end.

Lastly all contracts we enter into we have to weigh the risk reward ratio. You lose lien rights (in Illinois) at 90 days I believe. Therefore it is out policy to begin the lien process on any payments 60ish days past due. This way the process is well under way before the 90 day mark hits. I therefore have to weigh the risk:reward and see if I am willing to waive my lien rights upfront. That's not something I am willing to do for anyone. 

If for some reason someone told me they were willing to pay my price including all my late fees and interest, told me that I would have to wait 90 days; I would tell them upfront to protect my own rights I will have to file a lien at 60 days but will release it when payment is received. And guess what, my price just went up again to pay my lawyer to file then release a lien which typically is a fee I would collect after the fact if they were past due. However if it's a fee I know I will accrue upfront I will mark it into my cost because in a case like this it is not likley I will recoup it on the back end. 


I have to protect my company. As the manager of a business it is your first priority to play the role of risk manager. All other functions become secondary. At the end of the day I tell myself, if I am going to be working for free, I'd rather stay home with my kids.


My normal terms of payment as as follows... For jobs less than $1k, it's not worth the time no down payment. For jobs 1k-$10k 33% at time of signing. I am taking a risk here because my materials often run 50% of the contract price, sometimes 60%. Anything over 10K I equired 25% at signing, and 25% at material delivery. Anything I anticipate beign on the job for longer than a week I require some kind of draw or progress payment. Typically another 25% at half way completion. 

LOL I had a customer one time who I just did not trust. I did not want to give him an estimate but he chased me down for weeks. Finally I gave him the proposal with the terms of payment 110% down, any remaining balance refunded after completion. He never called me back. The point being I sometimes make special exceptions  but these exceptions go both ways though, like the 30 day net $8k commrcial job I mentioned earlier in this thread.


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