Magazine article Business Credit

Public vs. Federal: Know Your Project Type

Magazine article Business Credit

Public vs. Federal: Know Your Project Type

Article excerpt

In credit, it is important to "know your customer;" however, many times that is simply not enough to go on when trying to become a secured creditor in the construction industry. Knowing information about the customer is only part of the process for construction creditors, material suppliers or subcontractors. It is also important to know the project.

Understanding where you fit in the construction cycle can help make it easier during payment progressions. Moreover, knowing the type of project could be the most important aspect in construction since the project type determines the steps to take when looking to become a secured creditor and for payment.

Private construction jobs vary from state to state, and many require a notice before filing a mechanic's lien against the property. In some cases, a payment bond will also be issued during a private project. Public projects (those owned by a state, county, city, etc.) also differ from state to state, and mechanic's liens are not pursued. On public jobs, suppliers and others can file a claim against the payment bond, or in some states, the unpaid funds between the owner and general contractor.

The only case where projects are the same from state to state are when they fall under the protection of the federal Miller Act. This is essentially a payment protection tool for unpaid suppliers and subcontractors to be able to sue in U.S District Court for payment, as long as certain qualifications are met. It is important to note there is no notice requirement for jobs under the Miller Act, but NACM's Secured Transaction Services suggests serving one 45 days from last furnishing to prompt payment. …

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