A contractor recently accepted over $250,000 in deposits from 10 different clients, got ahead of himself and ending up going bankrupt. One young couple lost over $120,000. All of them would have been protected if they used New Avenue’s bid form and construction agreement. Read this post and use the format provided and this won’t happen to you!
Sadly, this is very common. In talking to a sales manager from the Hilte Tools, we learned that 30% of the small contractors that buy from him go bankrupt at some point. 30%! Hilte tried to understand this and found that the contractors usually have plenty of work and they are bankrupt due to a lack of payment and inability to collect for their work. This is due to either bad clients who refuse to pay or just disorganization that makes it hard to bill.
A few years ago, New Avenue hired this local general contractor to build a project for us. He had great reviews, they had completed projects for high end modern architects that are part of our team, and they have been in business for years. They passed our filters and likely would have passed your filters too!
When working with us, the contractor finished the project without a hiccup. As part of our standard process we received a detailed bid and we paid them as the work was completed on site. The project turned out well and even ended up in numerous magazines!
Then this contractor started building his own business independent of New Avenue and sold 10 more projects outside of New Avenue.
They took deposits on these projects and then mismanaged the business side. When the contractor went bankrupt he left his clients with nothing. Now those clients, including the young couple that is out over $120,000, is hoping to recover some money from materials that are sitting in a garage and slated for a bankruptcy auction. They’ll get pennies on the dollar if anything.
If those clients had used New Avenue they would paid for work after it is completed and visible on site. They would have been protected. They would not have lost their money.
Every client should have a policy to have a detailed bid, clear construction agreement that states what you are building and pay for work that is done. But as an owner you are probably doing this type of project once, or maybe twice. So there is no reason why you’d know how to do this.
That is why New Avenue provides the best practices in getting bids, construction agreements and paying with an easy transparent process.
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