W-LOANS

Access to bonding is only one of the barriers preventing smaller contractors from competing in public works construction. Small contractors are often caught in a vicious cycle that prevents them from obtaining surety bonds. They are unable to obtain surety bonds because they often lack the net worth and working capital to overcome surety underwriting criteria. Because they can’t land the profitable projects without surety bonds, these contractors are unable to build the required net worth and working capital to qualify for surety bonds. 

Sydney Capital provides undercapitalized firms access to working capital financing necessary to mobilize and properly cash flow their projects.  Construction Risk Management, which includes Funds Control and Disbursement, is a government-approved alternative to a payment and performance bond. It is a proactive tool that can identify problems as they occur, or even before, and allow for early correction.

Funds Control and Disbursement encompasses all of the activities necessary to manage the pay application and disbursement process of a construction project. 

From a construction risk management standpoint, sound accounting and business practice dictates not only keeping funds for different projects separated, but also examining the payment requests within each project very carefully. Appropriate invoice support and documentation must be submitted with the draw requests in order to verify that the requests are, in fact, valid and appropriate.

It is important to review the progress of the project to ensure that it is on track before any payments are made. Construction Progress Monitoring, which determines the percentage completion by line item, is usually done in conjunction with the Funds Control process.

The documentation that is inherent in a Funds Control and Disbursement program can significantly increase transparency to bank regulators, particularly during an audit.

Some measures include:

• Reviewing the pay application request
• Collection and review of supporting documentation
• Review of the percentage of the work completed
• Tracking change orders
• Lien waiver collection
• Distribution of draw proceeds upon approval – single payee checks are made directly to the subcontractors (sent via the GC for distribution purposes) to make sure the money gets to the right people in a timely manner.

Partnered with surety bond agencies, Sydney Capital funds control can mitigate project risk by closely monitoring project costs & ensuring that subs and suppliers that provided materials or performed work on the project are paid in a timely fashion.
– Specific escrow accounts are established for each respective job in the Contractor’s name and Tax ID. Absolutely no comingling of funds.
– Letter of Funds Directives are put in place creating a direct pipeline of funds from the obligee to the escrow account.
– Close monitoring of the schedule of values ensuring that funds are properly used specific to each project.
– Profit and Overhead is carefully calculated based on completion and funds received on the project eliminating front loading and the ability to rob Peter to pay Paul.
– Lien waivers accompany each check and are tracked to ensure subs and suppliers are paid up to date.

Federal Funds Control/Escrow
We have the ability to accept federal funds direct to the escrow account utilizing a Notice of Assignment qualifying under the Far Act. It is a common misconception in the surety world that federal funded bonded projects cannot utilize funds control or use the tool how it was intended to be used.

We work with GC’s to protect funds on a project when there may be some DBE or 8A risk concerns. With joint checks becoming less and less compatible, funds control can solve the internal risk concerns a GC may encounter by ensuring that funds are being allocated to those due on the project. This tool works wonders in teaming agreement situations.

Not all jobs require funds control up front but often the account can take a turn for the worse mid-job or mid-work program. We become involved at any point on a specific job either reconciling previous funds paid or funds controlling the remaining dollars on the contract.

When there are concerns from a supplier providing product to a client that brings with them payment risk, Sydney Capital can establish an escrow account to guarantee that the supplier will be paid once product is received.