Why Vetting the Contractor Is Just as Important as Evaluating the Project
Earlier this month at the Southeastern Small Business Lenders Conference (SESBLC), I joined a panel focused on due diligence in SBA lending. The conversation touched on a wide range of risk mitigation strategies across different disciplines.
One of the questions asked by the panel moderator was: “What’s something you believe lenders could do that would make their lives easier?” For me, the answer centered on contractor evaluations – and how taking that step seriously can improve project success and make lenders’ lives easier in the long run.
Let’s break this down with an analogy:
If the project is the horse, the contractor is the jockey.
Even the fastest horse won’t win the race with the wrong rider. The same goes for construction – your project’s success heavily depends on who’s leading it.
Why the Contractor Matters More Than You Think
Most lenders do a solid job underwriting the borrower and the scope of work. But evaluating the general contractor? That’s often a checkbox or an afterthought. And that’s risky.
The contractor controls the day-to-day operations, manages all the moving parts, and ultimately influences whether the project is completed on time, on budget, and to the right quality standard. A weak contractor can create gaps in scope, introduce costly change orders, or let timelines slip – none of which show up in a pretty spreadsheet.
Great Contractors Write Great Contracts
Experienced contractors bring more than just tools and labor – they help define and clarify the project from day one. When a good GC is involved, the contract documents are clearer, the budget is tighter, and potential issues are flagged early. That kind of clarity matters, especially for lenders.
When contracts are vague or poorly written, it’s often a reflection of the GC’s capabilities – or lack thereof. Incomplete plans or weak specs lead to change orders, disputes, or delays.
But with a seasoned contractor? You get proactive problem-solving, clear scopes, and solid admin that helps projects run smoother.
A Simple Tool to Start Vetting GCs
Want a starting point? Ask your borrowers for a completed AIA A305 Contractor’s Qualification Statement. It’s a standard form that outlines the contractor’s experience, financial strength, project history, and more. You can learn a lot about a GC’s capabilities (and red flags) in just a few pages.
If you don’t know what to look for on that form, we’d be glad to help.
In construction lending, the risks don’t just lie in materials and labor costs – they’re tied up in the people running the show. The better the jockey, the better the ride.
At USA Construction Consultants, we specialize in providing expert construction consulting services for SBA-backed projects. From pre-construction document reviews to contractor evaluations and draw inspections, we help ensure compliance, mitigate risks, and keep your project on track.
Whether you’re a lender, developer, or small business owner, our consulting services give you the confidence to move forward with your SBA-funded construction project.
Ready to navigate your SBA construction loan with expert support? Contact us today to learn how our team can help streamline your project from start to finish.
Visit Our Blog for more insights on construction management and risk mitigation: USA Construction Consultants Blog.
