Cash flow is a significant challenge in the construction industry. Contractors often must cope with 30- to 60-day payments and holdbacks of as much as 40% until the completion of the job.
In the meantime, while doing the job, they must pay for their biggest expenses — equipment, fuel and labor — much sooner. Contractors generally must pay for all their fuel within 10 days, their labor within two weeks and their equipment rentals within 30 days.
When it comes to equipment rentals, contractors typically set up accounts with a small number of professional rental house with whom they have done business before – with net 30 terms.
Things changed when the pandemic drove the demand for residential and commercial construction thru the roof. Buyers needed to find more suppliers, and new suppliers weren’t always eager to extend terms to buyers they didn’t know in a hot market for commercial equipment rental.
CEO and Co-founder Kevin Forestell of construction equipment rental marketplace DOZR, found its marketplace in the right place at the right time as buyers and suppliers both wanted to expand their networks. The addition of a new B2B financing option has only made those buyer/supplier relationships much more customer-centric, regardless of whether the customer is a buyer or a supplier.
“We’re very, very customer-obsessed and we kept thinking – ‘hey, these contactors are squeezed for cash flow, and if there’s a way that we can help them, we want to find it,’” he told PYMNTS’ Karen Webster.
Offering Extended Terms
By doing so, DOZR has integrated a B2B BNPL solution into its platform which works much like its consumer counterpart. Suppliers enable the BNPL button on their checkout pages, and buyers are underwritten and extended credit and terms within five minutes. Suppliers get paid immediately, and the buyer gets 60 days to settle the tab.
“We’re really excited that these are really extended terms from anywhere close to norm, and the terms then [enable buyers] to access thousands of suppliers, rather than one or two,” Forestell said.
For the equipment suppliers, the BNPL option offers the benefit of getting paid automatically when the rental comes through DOZR, so they don’t have to have the accounts receivable (AR) process collecting on rentals after 30 days.
Providing Greater Access to Suppliers
Cash flow is a significant challenge in a business where the cost of renting equipment can range from a couple hundred dollars a day for a scissor lift to $20,000 a month for a 40-ton excavator.
And Forestell said providing access to wider rental supply helps contractors avoid the ordeal of hunting down rental companies at the last minute to find the equipment they need to do the job on any given day.
The schedules of construction projects are often fluid, with construction companies having to pause work on a project because of delayed delivery of materials to a job site, inclement weather or other challenges.
“So, it becomes fairly last-minute and things change,” Forestell said. “And when one job site changes, you may at the very last minute realize that you can work on another one and have to move over.”
DOZR is using Flexbase Pay as the BNPL platform.
Giving Suppliers Access to Demand
DOZR has experienced tremendous growth over the last couple of years as the construction industry saw all-time high demand. At the same time, there have been challenges with purchasing equipment, which in turn drives up the rental demand and professional rental houses’ utilization rates.
In practice, with DOZR, a contactor visits the company’s website, signs an agreement for a rental duration and pays upfront. When the time to return the equipment nears, DOZR communicates with the renter to see if they expect to return it when planned or extend the rental. If it’s the latter, the renter confirms and pays for the extension.
DOZR started out with a peer-to-peer (P2P) solution for equipment rentals and found that the demand side of the industry was eager to order online. As professional suppliers saw the demand being generated through the P2P platform, they asked if they could get access to that demand.
“That’s really why DOZR has become so obsessed with bringing eCommerce solutions to construction equipment rentals,” Forestell said.