Most contractors want to get paid when the job is done. That’s human nature. But it may not be the best way to do business. Ask any car dealer what would happen if every buyer had to pay cash on delivery. Sales would tank. Credit can create sales opportunities you didn’t know existed.
Some of the most successful builders offer a credit term — monthly payments after the job is done. If you’re in a position to defer part of the income from completed jobs, consider making credit part of your sales pitch.
It’s perfectly legal to take an IOU for part of the job or stretch out payments after work is done. But a construction contract with a deferred payment term has to include disclosures required by the Federal Truth in Lending Act (T-I-L). Banks, car dealers and finance companies are good at writing agreements with all the required disclosures. It’s at the heart of their business. But any construction contractor can do the same thing. And Construction Contract Writer makes it easy.
This is one area where home repair and improvement specialists have an advantage over custom home builders. I don’t know any new home builder that offers to finance what they build. But it’s a natural for repair and remodeling contractors to offer extended payment terms, especially when that helps close the deal.
All the Details
The Financing Calculator in Construction Contract Writer does all the T-I-L math. Enter into the calculator what you know: the bid price, the down payment, other charges and credits, the proposed interest rate, the number of payments. Those are easy. CCW’s financing calculator does the heavy lifting — figuring the amount financed, the finance charge, the APR, monthly payments, etc. — and inserts those numbers into your construction contract. All disclosures required by T-I-L are automatic.
Even if you don’t plan to offer credit on a job, T-I-L disclosures have to be in the construction contract any time you recommend a lender – even if the lender makes all T-I-L disclosures in the loan docs. If you’re in the habit of recommending a lender to clients, the finance calculator in Construction Contract Writer should be part of your tool kit. Fail to make the required disclosures and you’re liable for both the overcharges and your client’s attorney fees. You don’t need that.
One other point: CCW doesn’t write the loan docs. You’ll still need the IOU. But all T-I-L disclosures and payment terms are laid out precisely in the construction contract. Just copy and paste from your CCW contract to the loan papers.