Electrical estimating and contracting. In part 1 you learned that having credit to buy materials helps grow your business.
In part 2 we explore how to obtain a credit line with bad credit.
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. It guarantees your supplier will get paid for materials installed on a job. Long story short, the general contractor makes the check out to the supplier and your company. The supplier deducts how much is owed for materials and cuts you a check for the balance.
Your supplier has the agreement forms.
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. Your supplier creates the paperwork. You and your general contractor sign the paperwork.
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: Electrical Estimating and Contracting – Obtain a Credit Line if you have challenged credit. Part II
Pros and Cons
The downside 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.
The up-side is your distributor will help you fund much bigger jobs that require more money for materials.
So, ask your distributor 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, you can look for bigger jobs.
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