Service Area: Notice and Mechanic’s Lien Services

P3s Created by Contract, Not Statute

Posted on March 15, 2019 by - In Other Commercial Credit News

Public Private Partnerships (P3s) Are Created by Contract, Not Statute

Public Private Partnerships (P3s) can be incredibly beneficial, especially in financing large construction projects. Frequently, a P3 assists public entities with improving public infrastructure by teaming up with a private entity for funding.

Generally, a P3 is an agreement between a private entity & public entity for the construction of a project, whereby the private entity provides the funding which is often lacking in the public sector.

An article from the Associated General Contractors of America (AGC), includes a definition of P3 from The National Council for Public-Private Partnerships. A P3 is a:

“contractual arrangement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.”

Yes, P3s are Created by Contract, Not by Statute

In Would Broader Use of P3s Benefit Subcontractors, attorney James Rohlfing states all P3s are different “Because P3s are created by contract, they vary greatly from one state and one project to another.  For that reason, to protect the public, many states have enacted broad enabling legislation that describes the potential uses of P3s as well as the restrictions on their use.”

Not only is P3 legislation broad, it’s still quite young; the industry should anticipate and participate in future proposed legislative changes. Rohlfing points specifically to subcontractors and key factors they should be watchful of –

“Subcontractors should be watchful that any proposal for a law enabling the broad use of P3s not undercut the rights of subcontractors under existing laws and contracts to:

1) secure payment for work and materials furnished for a project;

2) protect subcontractors and others under public procurement restrictions;

3) mandate prompt payment of invoices; and

4) recognize flow-down responsibilities from higher tier participants in the construction chain.”

Mechanic’s Liens or Bond Claims on P3s?

That’s a great question! The answer, unfortunately, may not be as great. “P3s are a hybrid between public and private, neither liens nor bonds are assured as a means to secure payment.” writes Rohlfing.

If you are furnishing (or will be furnishing) to a P3 project, you must carefully review the state’s statute. Always request a copy of a payment bond as the bonds are often required by statute.  You may even want to consult with legal counsel to confirm whether you are covered by statute, your contract, or if it’s in your best interest to obtain alternative security like credit insurance.

Kristin’s Credit Corner

Perhaps I should call it “Kristin’s go-to advice” instead, since I seem to say this often – but hey, at least I’m consistent: Know who you are doing business with and take steps to secure your right to payment.

Ask questions! 

  • Complete a job information sheet, make sure you know who is within the ladder of supply.
  • Don’t wait until the last minute to inquire about whether the project is bonded & if it is bonded, obtain a copy of the bond as soon as possible.
  • Embark on each project with the intention of keeping the lines of communication open and flowing.

To echo a sentiment from Rohlfing’s article, don’t assume you can rely on mechanic’s lien statute or bond claim statute, and NEVER assume you will be timely paid.

P3s have seemingly infinite potential! But you must be your own advocate.

Advocate for your rights to payment protections and if managing the process becomes too cumbersome, partner with companies like NCS – let someone with the expertise carry the burden so you can keep doing what you do best!

Is it a Bird? Is it a Rule? It’s a Cardinal Change Order!

Posted on March 8, 2019 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Is it a Bird? Is it a Rule? It’s a Cardinal Change Order!

Change orders. Everyone’s got ‘em! But, what’s the difference between a change order and a cardinal change order? Read on to find out!

Boring Ol’ Change Orders

A change order is a change to the original contract. “I need more material” is a common trigger for a change order. Some construction projects encounter hundreds of change orders – verbal and written (written, of course, is preferred, though surprisingly difficult to obtain).

Generally, a “boring ol’ change order” isn’t for terribly significant changes or changes that would change the entire scope of a project. As I mentioned above, a change order is likely a request for additional material because an estimation was wrong, or the material sent needs altering.

I should mention, although it may not be a significant change it may be substantial enough to change your last furnishing date.

I know…“Can open. Worms everywhere.”

Cardinal Change Orders

When you think of cardinal change orders, think specifically about the word cardinal. Not the red bird, but rather the idea that something is essential, fundamental or vital (thank you Merriam-Webster).

Joseph R. Young with SmithCurrie provides an excellent definition in his article Changes and Extra Work – Is There a Limit?

“A “cardinal change” is a change or the culmination of changes ordered by the owner that are beyond the scope of the contract and that may constitute a material breach of contract.” 

Young goes on to explain that these cardinal changes are “beyond the reasonable expectation of the original undertaking and have significant planning, scheduling, and cost implications…”

How Do I Know the Difference?

Construction contracts and, of course, mechanic’s lien statutes are never black and white. Within the text there are inferences, assumptions and text is always open to interpretation. So, how do you know if the change order(s) is a cardinal change order?

In true construction-related fashion, the answer is: it depends.

Young reinforces this answer:

“There is no bright line rule about what could be considered a cardinal change or what was reasonably contemplated by the parties in the original contract. Unless the contract expressly limits the owner’s right to issue changes, reliance on the cardinal change doctrine is a risky basis to refuse additional or changed work. Clear contract language addressing the scope and magnitude of permissible changes is the most reliable source of addressing significant changes.”

There is a chance that a change may be drastic enough to be an obvious cardinal change, such as changing plans for the construction of a 1200 sq ft single family residence to a 200,000 sq ft commercial shopping center. But, the likelihood of something that obvious is slim at best.

Best defense? Young recommends including verbiage within the contract.

“The contract should address some limitations on the extent of changes or place restrictions on material changes in the use of the project or the contractor’s work. The contract should also address when the contractor may refuse to perform changed or additional work. By clearly defining the limitations of the changes clause, parties can minimize the disputes about ambiguities over the legal concept of “cardinal changes”, and the parties can eliminate the risk of an unnecessary dispute as to whether there has been a cardinal change. The best course of action for all parties is to incorporate the cardinal change concept into the contract and follow the terms of the contract in managing and addressing changes.”

My Advice

If you are drafting a contract, have a contract lawyer review the document. If you are in the middle of a dispute, consult an attorney – don’t try and navigate the possible breach of contract claims on your own.

Washington Mechanics Lien and Bond Claim Rights

Posted on March 4, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Everything You Need to Know about Washington Mechanics Lien and Bond Claim Rights

Starbucks, Jimi Hendrix, Bing Crosby, Mt. Rainier, Boeing and Microsoft come from the great state of Washington, the only state named after a president. The intense clean-up efforts of the Hanford Nuclear Waste site, the replacement of the Alaskan Way Viaduct, the continued expansion of the Sound Transit and the ongoing construction of mixed-use property (commercial & residential) in high population areas are driving construction in Washington.

In fact, according to ENRNorthwest, Seattle ranked at the top of U.S. cities with active construction cranes in 2018 (neighboring Portland, Oregon held its own in fourth place) much in part to the boom in mixed-use real estate construction.

Construction is awesome!

It is great for the economy, state infrastructure and, with a growing population, it’s a necessity. Unfortunately, construction projects also come with financial risks. 2018 was a big year for construction in Washington and predictions for 2019 are just as strong. Are you prepared to secure your Washington mechanic’s lien, stop notice, bond claim and public improvement lien rights?

Washington Mechanic’s Lien

First Step? Timely Serve the Preliminary Notice!

Washington preliminary notice requirements are a bit intense, depending on the project type:

  • On small commercial (when general contract is $1,000.00 or more, but less than $60,000.00; or 4 or fewer unit Residential Projects when general contract is more than $1,000.00), contractors who contract directly with the owner must serve a Notice to Customer upon the owner and obtain a signed copy prior to first furnishing materials or services. Contractor must retain the signed copy for three years.
  • On commercial, multi-family, or small commercial projects, serve the Notice to Owner upon the owner and prime contractor within 60 days from first furnishing materials or services. A late notice may be served, but the lien, when later filed, will only be effective for materials and services provided 60 days prior to serving the notice and thereafter. The Notice to Owner is not required for subcontractors contracting directly with the prime contractor, laborers, and those contracting directly with the owner.
  • On new construction of residential single-family projects, serve Notice to Owner upon the owner and prime contractor within 10 days from first furnishing materials or services. A late notice may be served, but the lien, when later filed, will only be effective for materials and services provided 10 days prior to serving the notice and thereafter. The Notice to Owner is not required for subcontractors contracting directly with the prime contractor, laborers, and those contracting directly with the owner.
  • On construction of existing residential single-family projects, serve Notice to Owner upon the owner as early as possible. The lien, when later filed, will only be effective for amounts not yet paid to the prime contractor at the time the notice is received. The Notice to Owner is not required when contracting directly with the owner.

Second Step? Mechanic’s Lien Time!

Whether the project is commercial, residential, new or improvement, the mechanic’s lien deadline is the same: file the mechanic’s lien within 90 days from last furnishing and serve a copy of the lien upon the owner within 14 days from the filing of the mechanic’s lien.

OH! I nearly forgot, for commercial projects Washington is a full balance lien state. This means, the lien is enforceable for the full amount owed, regardless of payments made by the owner.

And one more tidbit: mechanic’s liens can be bonded off in Washington! But don’t fret – that just means your security changes from the property to the bond.

Third Step? Suit Up!

If the filing of a mechanic’s lien does not prompt payment, you should file suit to enforce the mechanic’s lien within 8 months from the filing of the lien.

Washington Stop Notice

First step? Timely Serve the Preliminary Notice!

Fortunately for you, me & this blog post, I don’t have to restate the information for serving a preliminary notice to secure stop notice rights. In fact, it is recommended you serve the preliminary notice as outlined for the mechanic’s lien section. This means I can literally say, see above! <<insert grin>>

Important Note: in Washington, a stop notice is not applicable if there is a payment bond of at least 50% of the amount of construction financing.

Second Step? Stop Notice Time!

Serve the Stop Notice upon the lender, owner and prime contractor after 5 days from the date payment was due, but within 35 days from the date payment was due. If the lender does not withhold the amount claimed from subsequent draws, the mortgage, deed of trust, or other encumbrance securing the lender shall be subordinated to your lien to the extent of the construction financing wrongfully disbursed.

Third Step? Suit Up!

Actually, statute does not include a provision for suit against the stop notice. In the event the lender does not withhold said payment, you may need to proceed with suit (think “breach of contract” type suit). Although I find statute fascinating, I am not an attorney & I strongly encourage you to seek legal guidance!

Washington Bond Claim

If you are furnishing to a public project in Washington you should always attempt to obtain a copy of the payment bond from the public entity which contracted the project. For that matter, any time you are furnishing to any public project across the US and even in Canada, always attempt to obtain a copy of the payment bond!

Generally, payment bonds are required on all public work contracts. General contracts of $150,000.00 or less may be exempted from the bonding requirement provided 10% of the contract amount is retained by the owner for a period of 30 days after final acceptance.

First Step? Timely Serve the Preliminary Notice!

Serve notice upon the prime contractor within 10 days from first furnishing. The notice is not required when contracting directly with the prime contractor or when providing only labor.

Pro Tip: a notice may not be required, but as a best practice, you should ALWAYS serve a preliminary notice

Second Step? Bond Claim Baby!

Serve and file the bond claim notice with the public entity within 30 days from completion and acceptance of the project.

Third Step? Suit Up!

File suit to enforce the bond claim in accordance with the terms and conditions of the payment bond. It is recommended that suit be filed to enforce the bond claim after 30 days from filing the bond claim, but within 4 months from filing the bond claim or 4 months from completion and acceptance of the project.

Washington Public Improvement Lien

First Step? Timely Serve the Preliminary Notice!

Material suppliers must serve notice upon the prime contractor within 60 days from first furnishing materials or services. A late notice may be served, but the lien, when later filed, will only be effective for materials and services provided 60 days prior to serving the notice and thereafter. No notice is required when contracting directly with the prime contractor or when providing only labor.

Second Step? Public Improvement Lien Time!

Serve and file the lien upon the public entity within 45 days from completion of the project. The claim is a lien on the funds the public entity is required to withhold from the prime contractor. Serve and file the lien as soon as possible to trap the funds.

Third Step? Suit Up!

If serving the public improvement lien does not prompt payment, you should file suit to enforce the public improvement lien within 4 months from the filing of the lien.

Side by Side Comparison

There is a LOT of information in this post, so I thought a table may help!

Questions about lien and claim rights in Washington? Contact us today!

Michigan’s Design Professional Lien Rights Amended

Posted on March 1, 2019 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Michigan’s Design Professional Lien Rights Were Recently Amended

At the end of 2018, Michigan amended a portion of its Construction Lien Act regarding mechanic’s lien rights & procedures for design professionals. This amendment specifically addresses what a design professional can do in the event it is unpaid and the owner does not proceed with the project.

Michigan Construction Lien Act (MCL 570.1101)

To be clear, Michigan’s Construction Lien Act provided design professionals mechanic’s lien rights prior to this amendment. What statute didn’t account for, at least not well, was what happened if the project owner didn’t move forward with the project.

Under the amended statute, design professionals should record a Notice of Professional Services Contract (or Notice of Professional Services Subcontract) with the register of deeds. This notice should be filed once the written contract is executed but no later than 90 days after last providing professional services.

“(2) A design professional may record a notice under subsection (1) at any time after the written contract is executed regardless of whether the professional services under the written contract have been commenced or completed, and regardless of whether the erection, alteration, repair, or removal of the structure or the other improvement to which the professional services relate has been, or is ever, commenced or completed. However, a design professional shall not record a notice later than 90 days after the design professional, or another person acting by, through, or under the design professional, last performed professional services.” 570.1107a

There are two sections to the statute. The time frames are the same, but if you “subcontract for professional services with design professional” the notice requirements are slightly different. The notice for those subcontracting must include written approval from the owner.

“(1) A person that furnishes professional services under a written subcontract with a design professional who has recorded a notice under section 107a, and whose engagement has been approved in writing by or on behalf of the owner of the property, may record with the register of deeds for the county in which the property is located a notice of the subcontract…” 570.1107b

Hot Tip!

Michigan statute provides a template for the Notice of Professional Services! (click for 570.1107a “contract” or 570.1107b for “subcontract”)

Jeffrey Gallant recaps the high points in his article “New and Improved” Design Professional Lien Rights and Procedures in Michigan, including that a “lead” design professional must file its notice before the subcontract design professional can file its notice.

Gallant’s recap (formatting added):

“The Design Professional Notice

(a) is valid for one year after it’s recorded, but subsequent notice can be recorded if needed;

(b) has a priority date (relative to other interests and encumbrances on the property) based on the date the notice is recorded unless actual physical construction work commences;

(c) has a priority date based on the first date of actual physical construction work, if construction commences.

The amended CLA also maintains equal priority between construction lien claimants, irrespective of whether the lien claimant is a design professional, contractor, subcontractor or supplier.”

Does This Mean No More Notices of Furnishing or Mechanic’s Liens?

Nope! As Gallant confirms, design professionals must still comply with serving a notice of furnishing and filing a lien within the required time frame.

The Notice of Professional Services Contract is an additional security, helping you if the project doesn’t move forward. Whereas the general mechanic’s lien statute (notice>lien>suit) is there to help you once the project is under construction.

Wondering about mechanic’s lien rights in Michigan? Check out our post on Pure Michigan!

Tennessee Lien Rights & Everything You Should Know

Posted on February 25, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Tennessee Mechanic’s Lien Rights & Everything You Should Know

It’s the home of the Grand Ole Opry, Music Row, Graceland, Great Smoky Mountains National Park, the Belmont Mansion and even Justin Timberlake! It’s Tennessee. Securing mechanic’s lien rights on Tennessee projects can be challenging. In today’s post we will break down the requirements to put you on the path to payment.

Tennessee Mechanic’s Liens

In Tennessee (TN), the preliminary notice requirements are dictated by the project type (commercial or residential) and who you contracted with (directly with the owner or another member of the ladder of supply).

If you are furnishing to a private commercial project & you contracted directly with the owner, you should serve a notice upon the owner prior to commencing the project. As the prime contractor, you may record your contract to have priority over subsequent conveyances.

If you are furnishing to a private commercial project & you contracted with the prime contractor or a subcontractor, you should serve a notice of non-payment upon the owner and prime contractor within 90 days from the last day of EACH month in which materials or services are provided.

Yikes, that’s a mouthful!

Here’s an example:

If you furnish February 7, 2019 your notice of non-payment for your February furnishing is due May 29, 2019. (90 days from February 28 is May 29.)

Now, if you are paid for your February furnishing before the May 29th deadline, then you don’t need to serve a notice of non-payment.

Pro-Note: TN courts have ruled the notice of non-payment must be received within the 90-day period. This means, the document must be in the hands of the required parties by the 90th day – you can’t simply drop it in the mail on day 90.

Residential projects are a bit different. First, it’s important to understand that a residential project is defined as owner-occupied one-, two-, three-, or four-family dwelling units.

Unlike its commercial counterpart, for those furnishing to residential projects, a notice of non-payment is not required for months furnished but unpaid. HOWEVER, you will only have mechanic’s lien rights on a residential project if you contract directly with the owner.

Mechanic’s lien deadlines in TN are dictated by project completion or abandonment. For commercial projects, you should file the lien and serve a notice of the lien on the owner within 90 days after completion or abandonment of the project or 30 days from the date the notice of completion was filed.

For residential projects, you should file the lien and serve a notice of the lien on the owner within 90 days after completion or abandonment or 10 days from the date the notice of completion was filed.

Pro-Tip: Calculate your deadlines conservatively! Knowing the date of project completion can be difficult, to say the least. We recommend calculating your mechanic’s lien deadline 90 days from your last furnishing date.

TN statute provides an example the Notice of Lien. At face value it appears to be no big deal – it’s just a form. But remember, it really isn’t JUST a form – to have a valid lien you must complete and properly record the document with correct required information! (see 66-11-112. Preservation of priority of lien for subsequent purchasers or encumbrances — Abandonment — Lien on structure with water furnished by well — Form for notice of lien)

Our research shows less than 1% of your projects will go to suit.

In the unlikely event you need to file suit to enforce your mechanic’s lien, you should file suit within 90 days from the date the lien is served upon the owner. If you are contracting directly with the owner, you should file suit within 1 year from completion or abandonment of the project.

Need help with your Tennessee notice of non-payment or mechanic’s lien?

Contact us – our Tennessee experts are standing by!

Time for Preparation, There’s No Rest Post-Recession

Posted on February 22, 2019 by - Credit Risk Management, In Other Commercial Credit News

Use this Time as Preparation, There’s No Rest Post-Recession!

FMI has released its 2019 U.S. and Canada Construction Outlooks. The report contains a considerable amount of valuable information, but one topic is forefront: be prepared for the next recession. Today I’ll touch on steps outlined by FMI as well as NCS best practices you can implement to ensure you are prepared for the next economic downturn.

Awesome T-Shirt: “Keep Calm, Stay Focused and Get Ahead of the Next Downturn”

I’m going to emboss it & stick it to my computer as a reminder! The introduction to FMI’s outlook article is titled “Keep Calm, Stay Focused and Get Ahead of the Next Downturn.” Yes, I think it would be a great t-shirt, but more importantly, it’s a reminder that you have an opportunity to ensure you have the working capital and business model to make it through the next downturn.

What did we learn during the Great Recession? Hopefully you learned the value in proactively securing receivables! During the Great Recession, you likely experienced supply chain disruptions, slow pay/no pay customers, depleted liquidity or cash flow issues, and even customer insolvency. What have you done to prevent these experiences going forward?

FMI recommends addressing these 7 hurdles now:

1. Evaluate underperforming departments and employees. If you have been dragging your feet on eliminating a low performing division or a poor performing employee, now is the time to have the conversations. You don’t want this hanging over the business during tough economic times. FMI says, “During the last recession, these types of issues plagued E&C companies for far too long. Leadership that is slow to react and respond can make or break a company.”

2. Be selective in new projects. Select projects within your core competencies. FMI has a saying: “Contractors don’t starve to death; they die from gluttony. They get too much work, too fast, with inadequate resources, and then they get into financial trouble and run out of cash.”

3. Look at the big picture and have a strategy in place. “Living in a reactive mode and not being proactive and taking charge of shaping your own destiny and future can become your biggest detriments.”

I will come back to 4 & 5. Let’s jump to 6 & 7: get your sales game on!

6. & 7. Strengthen existing client relationships, build new relationships, and get your sales folks prepared.

“…educate your people on “how to behave in a recession”—estimators with project selection, field managers with scope management, PMs with cash management, etc. Client interaction across all company levels will increase your presence with clients, give you an inside track and improve collaboration among future leaders.”

4. Know your costs and plan accordingly. “Understanding the total costs for each project and how these costs break down is the first step in knowing where and how you can improve profit margins.”

5. Cash is King! “Conduct a risk analysis on all existing projects slated to complete more than six months out. Identify high-risk projects and how each will be staffed to take to project completion. Leverage and utilize a multiskilled workforce: In-house, self-perform capabilities can mean a difference on margins, time and manpower, while all-around adaptability can make a firm indispensable to satisfied clients.”

And this is where the NCS best practice fits in: implement a UCC and Mechanic’s Lien process.

Supply goods? Renting equipment?

File a UCC, even if it’s “a good, longtime customer” because absolutely no one is safe from insolvency. A properly perfected security interest affords you crucial leverage if your customer defaults, plus, it puts you at the front of the payment line in the event of bankruptcy.

Furnishing to a construction project?

Serve a preliminary notice. Every. Time. The notice is critical when pursuing a mechanic’s lien or bond claim. Many states require the service of a notice in order to proceed with a lien or bond claim. If you fail to serve a notice and you can’t file a lien, you have lost the leverage the law affords – is that a risk you want to take?

Ensuring the process is in place now helps to normalize the process for your internal customers (sales & credit) and your external customers. This is big: NORMALIZE.

UCCs and mechanic’s liens are not to be feared. It is a business practice used by millions and it can be vital to your working capital and subsequent business survival.

Implementing the process now, when economic times are great, helps put a positive spin on UCCs and mechanic’s liens.

It gives you an opportunity to demonstrate to your customers that there is no harm in either process, because everyone is getting paid & happy. Then, when the next downturn comes around, you will spend less time scrambling to secure these rights and battling upset customers – “Why did you send me this prelien notice?!?!” – and more time increasing your sales and, in turn, your working capital.

Arkansas: You Can’t Lien a Property You Didn’t Improve

Posted on February 15, 2019 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Arkansas Mechanic’s Liens: You Can’t Lien a Property You Didn’t Improve

Turns out, if you want to secure a mechanic’s lien in Arkansas, the lien must be filed against property you improved. Kind of feels like a face-palm moment, right?

I know what you are thinking “Kristin, of course I can’t file a lien against a property if I didn’t furnish to the property.” So, let me clarify, if the property owner has multiple parcels of land, you need to specify which parcel is related to the improvement. Identifying the wrong parcel, as one supplier has learned, can result in an invalid lien.

Steps to Securing Lien Rights in Arkansas

Commercial projects and residential projects are treated differently in Arkansas.

Residential Notice:

  • Include notice in contract or serve residential notice upon the owner before first furnishing materials or services. (The notice may be served after furnishing, but the lien, when later filed, will only be effective from the date the notice was served.)
  • A residential contractor who fails to give the notice may be fined up to $1,000.00, and is barred from bringing an action to enforce any provision of the residential contract.
  • No residential notice is required when:
    • the notice is incorporated within your contract,
    • the prime contractor or another lien claimant has served the notice upon the owner,
    • the prime contractor furnishes a payment and performance bond, or
    • you contract directly with the owner, to provide materials or services, but you are not a home improvement contractor or a residential building contractor.

Commercial and Residential (with more than 4 units):

  • Serve notice of non-payment upon the owner and prime contractor after last furnishing materials or services, but within 75 days from last furnishing materials or services.
  • The 75-day notice is not required of prime contractors contracting directly with the owner.

In Arkansas, the mechanic’s lien for commercial and residential projects is a two part process: notice of intent followed by the filing of the lien.

  • Serve a notice of intent upon the owner at least 10 days prior to filing the lien.
  • File the lien after last furnishing materials or services, but within 120 days from last furnishing materials or services.
  • Serve a copy of the lien upon the owner.
  • If the notice of intent cannot be served within the 10-Day time frame, file the lien and suit to enforce the lien within 120 days from last furnishing materials or services, requesting both the lien and foreclosure.

This Is for the Birds, or Is It?

According to the court opinion, the property owner had at least 5 parcels of land. The owner’s home & a barn were on one of the parcels, and the subsequent parcels held several poultry houses.  [The home & barn were at 20190 Garman Road and the poultry houses were at 20178 Garman Road.]

The HVAC materials furnished by the supplier were for the improvement of two poultry houses. When the supplier filed its lien, the supplier included a legal description of the property. But the legal description was for the parcel that held the house & barn [20190 Garman Road], not the parcel with the two poultry houses [20178 Garman Road].

Arkansas statute specifically states “the lien shall contain a correct description of the property to be charged with the lien.” A.C.A. § 18-44-117 In this case, the supplier clearly identified the wrong property in its lien.

In his article Construction Law in Arkansas: Construction Lien Filings and Property Descriptions – Sometimes Less Is More, author Larry Watkins leaves us with great advice:

“… if you provide a detailed real property description, make sure it describes the construction site where the materials or labor were provided. Remember that for describing property for lien filing purposes, general may be better than specific, and, sometimes, less is more.”

Need help securing your mechanic’s lien rights in Arkansas? Contact us today!

Approve More Small Businesses for Larger Sales

Posted on February 11, 2019 by - Credit Risk Management

Approve More Small Businesses for Larger Sales

By: Pam Ogden President, Business Credit Reports

As originally published in the Credit Research Foundation 3Q 2018 CRF News

Small businesses are a critical component of the American economic engine, contributing about half of the gross domestic product of the US. Companies that undervalue this all-important segment are leaving money on the table.

In any credit deal, you want to extend as much credit as possible without exceeding acceptable risk levels to generate the biggest sales possible. This principle is not limited to only large, well- established companies with dozens or hundreds of tradelines. The same applies to smaller, growing companies that may have more limited credit records. The challenge is in collecting enough information on the smaller company to establish a certain level of comfort on the risk front. The more information, the better, of course.

Smaller Companies Have Thinner Credit Records

Companies that issue credit are not required to report their payment data to all of the credit bureaus. In fact, they are generally not required to report payment activity at all. The credit bureaus all have data acquisition teams whose sole job is to get lenders, manufacturers, distributors, utilities and other companies to send them their account data to build and update the credit bureau’s database.

So, if there is nothing forcing companies to report their payment data to the credit bureaus, what is the result? We get disparate credit records across the various credit bureaus. Each credit bureau has a different perspective on a company. Nobody has the complete picture. This problem is amplified in the case of a small business that doesn’t have many credit relationships to begin with. Each credit relationship makes up a greater share of the complete credit picture. Missing even one or two of these can dramatically change the risk profile of a small company.

Credit managers know that less data on a prospective customer frequently means more risk. Credit policies are written to reduce credit offered when there is less information on a company. This puts smaller companies at a disadvantage in terms of obtaining the credit that they need to grow their business. It also means the company issuing credit to the small business is granting less credit, thereby limiting the revenue opportunity.

Combining Multiple Credit Data Sources is the Key

The problem of incomplete credit records on small businesses is solved by leveraging multiple credit bureaus in the credit granting process. If each credit bureau has a piece of the complete picture, putting them all together delivers a full 360-degree view of the company. With three major credit bureaus and several others with strength in particular industries, the only way to get a complete credit picture of a small company is to pull them together.

Many credit managers employ a first-pull/second-pull practice whereby they check one credit bureau first, and then cascade to additional bureaus for additional information as needed. The drawback with this approach is you are paying for multiple reports to multiple providers and those reports are separate reports. Also, a hit on the first pull may result in a credit approval without proceeding to the second pull, which may indicate a higher credit limit.

A more efficient and economical approach is to utilize a business credit information provider that combines the data and analytics from multiple credit bureaus into one report. This means only one report needs to be pulled by the credit analyst and only one credit vendor relationship needs to be maintained by the credit manager. Also, the total price of a blended business credit report is frequently lower than the total price of multiple credit reports.

Higher Hit Rates

Often, small businesses are declined for credit because no record could be found in the queried database. This is a lost opportunity for the small business applicant and could also be a lost opportunity for the company that is considering issuing credit.

Pulling the data of multiple business credit bureaus into one report results in higher hit rates on small businesses. While one credit bureau may not have any information on a small company, another one might. Checking the databases of two, three or four credit bureaus increases the likelihood of finding a credit record on a small company.

While it may not be practical to query two, three or four credit bureaus separately, using a credit information provider or tool that connects to all of the bureaus gets the job done in one search. This results in higher hit rates and more approvals.

Bigger Sales

Bigger sales require higher credit limits. Higher credit limits require more information on a company that supports the case to grant credit. By pulling together data from multiple credit bureaus, you build a thicker, more complete credit record. With a more complete credit record, credit managers are able to approve higher credit lines which accommodate larger sales.

Credit managers that are able to approve larger credit lines without increasing risk are heroes to their companies. Sales people are happy because Credit granted them room to negotiate a large deal. Management is happy because more revenue is flowing in.

More Prospects for Growth

Today’s small businesses are tomorrow’s medium and large companies. Once a budding company has established a relationship with a vendor, it’s unlikely they will change as long as the provider continues to deliver as needed.

Establishing relationships with companies early in their life cycle enables suppliers to grow their own business and increases the prospects of a long, mutually-beneficial relationship.

In fact, one of the main reasons growing companies switch providers is because another provider is willing to grant more credit than the incumbent. Using a multi-bureau credit solution or tool can establish the relationship on the right foot with larger credit lines and keep it that way as credit lines are extended over the life of the relationship.

More Information Means Less Risk

We’ve covered how pulling together data from multiple credit bureaus into one solution increases revenue, but we’d be remiss if we didn’t also mention the fact that having more information on small businesses helps mitigate risk.

Because the credit bureaus frequently don’t have the full picture on small businesses, the credit bureau used in a single-bureau model may paint a rosy picture of a company while missing a key piece of derogatory information. Pulling together multiple credit bureaus’ data into one report reduces the chances of missing a key negative factor.

The Key Takeaway

Don’t leave money on the table as a result of no-hits and thin credit records on small businesses! Access credit reports that pull all the credit bureaus together into one search and one report for stronger hit rates and a more complete credit picture. With a comprehensive picture, you can issue higher credit limits and minimize your risk.

Would you like access to comprehensive credit reports without the hassle of contracts?