How Construction Technology is Turning Local Builders into Industry Giants
The construction sector is one of the largest in the world economy, with about $10 trillion spent on construction-related goods and services every year. Unfortunately, the growth of the industry has fallen behind the yearly growth of related products, especially in manufacturing and supplies used to develop the built world. With the introduction of construction technology, builders are hurdling competitors by utilizing new payment platforms, management programs, and cutting edge project software. While the biggest issue increasing the gap between career builders and competitors is the availability of supplies (lumber, garage doors, windows, and brick, not to mention the skilled tradesmen to install them), the delays in these materials continues to raise the cost of construction throughout the build, pulling contractors further from revenue goals. The biggest setback builders face today is TIME.
With production disruptions being so encumbering, builders are waiting months longer to receive basic home building materials. Additionally, with the delay in draw schedules, many suppliers and subcontractors are prioritizing large development builders that are able to make faster payments by using their own capital. Traditional banks are financing more than ever for individual projects to keep up with the rising cost of construction materials. The US Census Bureau recently referenced the 17.5% increase from 2020-2021 as the largest increase in construction material cost since 1970. With this increase in financing costs, banks have less money on hand. Many builders have been turned away by their long-time lenders due to reaching a capacity of lending volume for the institution's construction portfolio.
Thankfully, the construction technology world has turned its head toward solving this problem. During this building era when risk aversion has increased, loan duration is extended, and supplies and suppliers are in great demand, some tech companies have proved themselves as builder advocates among the rest. Project management and construction accounting softwares have been developed, which has helped keep projects on schedule despite material delays. Even more recently we have seen the emergence of payment platforms that enable on-demand construction financing, including some platforms that allow for digital inspections, digital lien waivers, and expedited payments.
Lenders are using a manual draw process that takes a minimum of 5-7 days to turn around a draw request. With a national average of 74 days to complete a draw, this payment timeline is out of touch with the speed of American industry. By utilizing a payment platform, like CoFi, builders can turn a draw on demand. With the help of digital inspections conducted by the GC or project foreman, draw requests can be granted immediately after being received by partner lenders. This collection of lenders has afforded builders the ability to shop their projects through a construction loan marketplace and return with the best rates and terms available to them. Turning a draw quickly is critical in this climate. Prioritizing fast payments to subcontractors and suppliers has become a mandatory part of a successful building industry.
The benefit of construction technology has been helping builders battle their way through difficult building climates. Management and payment software has decreased build time and increased profit margins. The reduction in time creates a more accurate project performance schedule. Fluctuations in material cost and subcontractor availability can destabilize a project. By keeping up with construction technology, builders and developers can more readily and seamlessly navigate through the built world in the 21st century.