Textura to enable general contractors to provide accelerated payments to subcontractors
General contractors are able to provide accelerated payments to subcontractors through an innovative alliance
Textura Corporation (NYSE: TXTR), the leading provider of collaboration solutions for the construction industry, announced that it has entered into an innovative alliance with Greensill Capital to enable General Contractors to provide accelerated payments to Subcontractors. The program will be called the Early Payment Program™ (EPP™). Textura will provide the technology for this program via CPM™ and its technology platform while Greensill will perform the underwriting and provide the funding, including engaging Morgan Stanley to securitize these payments to provide preferential funding to select parts of the program. Turner Construction Company worked with Textura and Greensill in the development of EPP, and will launch the program in early 2015.
"Like most small and medium businesses, Subcontractors often lack access to well-priced working capital," said Lex Greensill, CEO of Greensill Capital. "Banks continue to limit lending to small businesses. We see EPP enabling General Contractors to deliver significant benefits to their Subcontractor business partners, empowering them to grow through the improved cash flow and stronger balance sheet that can result from early payment and, in turn, driving job growth and economic recovery. Greensill Capital has committed a minimum of a revolving $250 million of its own funds to EPP financing and plans to deliver an initial minimum of a revolving $10 billion in EPP financing from a combination of its own balance sheet, third-party banks and, with the assistance of Morgan Stanley, the capital markets. Assuming an average of 45 days earlier funding to Subcontractors and 45% subcontractor participation in EPP, this initial revolving $10.25 billion would fund approximately $82 billion in Subcontractor invoices a year, which equates to approximately $225 billion to $250 billion in project construction value."
Textura–Construction Payment Management™ (CPM™) is currently used by over 300 General Contractors and Owners. The solution electronically integrates all construction payment management process components – including billing, progress claims, lien waiver collection, statutory declarations, sub-tier waivers, compliance management and payments – into one seamless workflow. CPM helps contractors and others involved in construction projects realize significant efficiency benefits from automation and streamlining, and risk reduction from improved control and visibility.
By expanding the functionality of CPM to include EPP funding by third-party financial institutions, CPM enables participating General Contractors to offer Subcontractors the opportunity to receive payment for invoices approved by the General Contractor earlier than the typical payment date.
Textura and Greensill have worked closely with Turner Construction Company, the leading builder in the United States, to conceptualize and develop this program. Turner recently began a company-wide implementation of Textura's CPM program to facilitate adoption of the accelerated payment program and to make the payment management process more efficient for Turner, its contractors and its clients.
"We are very pleased to form this new alliance and offer a new solution that benefits all of our clients through our technology platform," said Patrick Allin, Chairman and Chief Executive Officer, Textura Corporation. "EPP will address a longstanding structural challenge of the industry – namely, that work in process on a construction project is funded by the Subcontractors. Subcontractors perform the work but are typically paid for that work 30 to 60 to 90 days later. This puts pressure on a Subcontractor's balance sheet and acts to limit a Subcontractor's ability to grow and invest and in some cases leads to business failure. This is as much of an issue for the General Contractors that depend on their Subcontractors' performance as for the Subcontractors themselves. Our technology and Greensill's expertise and funding will finally enable General Contractors to address this structural challenge using Textura CPM and the EPP functionality. Subcontractors have the potential to be paid up to 30 to 60 days earlier under this program."
Each General Contractor will have a customized EPP program and Greensill will set up separate funding sources for each General Contractor. Under each program, enrolled Subcontractors have the opportunity to be paid shortly after invoice approval. There are benefits to all parties. General Contractors will be able to lower bids resulting in more work and/or to obtain better margins. In addition, General Contractors would be working with financially healthier Subcontractors, which would result in fewer defaults and lower claims. Subcontractors will be able to prepare bids expecting earlier payment after the work is performed, and accelerated payments should lead to stronger balance sheets, business expansion and less business owner risk.
Allin continued, "We expect to roll out EPP as a General Contractor-specific program in early 2015. Between now and then, Greensill and Textura will continue to meet with General Contractors and Subcontractors to explain the program."
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Textura® is the leading provider of construction management software and other collaboration and productivity tools for the construction industry.