Whilst the rate that builders are entering administration is alarming enough, what’s even more concerning is that despite an ever-increasing focus on financial due diligence, builders are regularly going under having only recently won significant new contracts – this means they have just passed DD!
Why is due diligence failing to identify builder cashflow issues?
Due diligence in its current form places the onus on the developer and lender; it’s their responsibility to review all available data & satisfy themselves of a builders’ capacity to fulfil existing contractual obligations.
The problem is, they’re often basing this decision on out of date, incomplete or in extreme cases, fraudulent information. Relying on ‘standard’ due diligence processes is leaving developers exposed:
IPEX is helping developers to ‘test’ builder financial claims prior to awarding a contract AND protect their project against any future builder cash flow issues.
Even if you are satisfied with your builders’ current financial position, we know that many developers are being caught out by a deterioration in their builders’ cashflow after they’ve been appointed.
The chances that all projects linked to your builder will be profitable are slim; they’ll likely be in a very different financial position in 3 – 6 months’ time but you’ll be in the dark, with nothing more than a ‘stat dec’ to confirm that your funds are being used to pay your bills and not covering cash shortfalls on another development.
IPEX is helping developers to protect their project against any future builder cash flow issues AND manage the impact to retain a level of project profitability should their builder enter administration.
