Joint Check Agreement. An “Agreement” you sign with your distributor that can launch you into bigger jobs.
A Joint Check Agreement is an agreement you sign between you, your supplier and the general contractor you work for. Your wholesale supplier has the agreement forms. The Joint check agreement will allow you to purchase materials to do a job, but the general contractor/owner must make out a joint check to your supplier and you for payment. You must take the check to your distributor and when the check clears the bank they make a check out to you for the difference.
Related: Obtain a Credit Line With At Least 3 Different Wholesale Suppliers
Often times if you have a joint check agreement with your distributor, they will extend you a higher limit of credit because they have a better guarantee of payment. Ask your distributor about this and how they would want you to proceed with it. They would create the paperwork to be signed by you and your general contractor or owner who pays you.
Example: You have a credit limit of $25,000.00 but you land a job which requires $35,000.00 of materials. You sign a joint check agreement with your distributor and the General contractor for the materials purchased on that job.
Related: Obtain a Credit Line if you have challenged credit. Part II
Pros and Cons
When the general contractor makes out your payment check. The check is made out to your supplier and you. You receive payment you take the check to your distributor. When the check clears their account your distributor writes you a check for the balance.
The down side of joint check agreements is it takes longer to get access to your money. The check is not made out to you. Your money has to travel through the account of your distributor then to your account.
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The up-side is your distributor will help you fund much bigger jobs which require more money for materials. Again, ask your distributor in advance about their policies for joint check agreements and what they would need from you to set up an agreement. If they give you the green light to do joint check agreements with them you can start looking for bigger jobs because you have back-up for buying needed materials.
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