Qualifying a Commercial Customer Before You Commit a Crew
Why this matters
Committing a crew to a commercial job means turning down or delaying other work to do it. If the customer turns out to be underfunded, disorganized, or a known slow-payer, you do not just lose that job, you lose the work you passed up for it. Residential lets you spread that risk across many small customers. Commercial concentrates it, so the homework you do before you say yes matters far more. Qualify the buyer and the project the way a lender qualifies a loan, because that is what committing a crew on terms actually is.
Know who actually owes you
Your risk is the party who signs your contract, not the famous name behind the project. On a typical commercial job the money flows owner to general contractor (GC) to you. If the GC is thin, a well-funded owner does not help you when the GC fails to pay.
- Identify the exact legal entity you will contract with, and confirm it is the one that pays.
- A property manager may sign on behalf of an owner; know whether they have authority and whose money stands behind them.
- The deep pocket up the chain is only reachable through lien rights, and only if you preserve them. Do not assume it backs your invoice.
Ask the subs who came before you
The single best predictor of how a customer will pay you is how they have paid other trades. This information is free and it is candid if you ask peers instead of the customer.
- Call two or three subs who have worked for this GC or owner. Ask a plain question: did you get paid on time, and would you work for them again.
- Ask your suppliers. Supply houses know which contractors pay and which stretch every invoice.
- A GC who runs organized jobs and pays on schedule earns a reputation, and so does the other kind. The trades talk; use the network.
Confirm the project is funded
A signed contract on an unfunded project is a promise, not a payment. Before you mobilize, get a read on whether the money is real and released.
- Is the project owner-funded, financed, or speculative? Financed and speculative jobs can stall when a lender pulls back.
- On larger jobs, ask whether a payment bond is in place. A payment bond is a surety guarantee that subs and suppliers will be paid if the GC does not, and its presence is a strong comfort signal.
- Watch for a job that starts before financing closes. Pressure to begin without funding confirmed is a warning, not an opportunity.
Check the contracting party's track record
A few minutes of research separates the solvent from the shaky.
- How long has the entity been in business under this name? A brand-new entity with no history carries more unknown.
- Search public records for liens or judgments filed against their projects. A pattern of mechanic's liens filed by unpaid subs is a loud signal.
- Confirm they carry the insurance and, where required, the bonding the work demands. An outfit that cannot produce a current certificate of insurance may be cutting other corners too.
The approved-vendor list cuts both ways
Many larger customers keep an approved-vendor or prequalified list, and getting on it is a gate to their work. Prequalification usually means submitting your license, insurance, safety record, financials, and references so the customer can vet you before they hire you.
Being on the list is worth pursuing, but it does not reverse your obligation. They qualified you; you still qualify them. A big organization can be on every approved list in town and still pay in ninety days. Do your own due diligence regardless of how official the relationship looks.
Qualification checklist
| Check | What you are confirming | Red flag |
|---|---|---|
| Contracting entity | The exact party that pays you | Vague or shell-like entity |
| Payment reputation | How they paid other subs | "Would not work for them again" |
| Project funding | Money is real and released | Start pushed before financing closes |
| Track record | History, liens, judgments | Pattern of subs filing liens |
| Insurance and bonding | They can cover the work | No current certificate available |
| Payment bond (larger jobs) | Backstop if the GC fails | None on a large, risky job |
The rule to keep
Qualify the customer with the same discipline you use to price the job. Commit a crew to buyers whose money and organization you have verified, and stay cautious with the ones who cannot show you either. The best time to walk away from a bad account is before your crew is standing on their site.
References
- SBA guidance on extending trade credit and evaluating customers
- Surety industry material on payment and performance bonds
- State mechanic's lien statutes and public lien and judgment records
- See related: Commercial Sub Qualification (SOQ) Pre-Bid; A Commercial Client Pays Slow but Orders a Lot