Answer extracted from the Forum Focus podcast — listen to the full episode below.
Why are 60, 90, and 120-day payment terms so damaging to construction contractors?
60, 90, and 120-day payment terms are now standard in construction, but they are particularly damaging to small and emerging minority and women-owned businesses. Large corporations understand how instrumental cash flow is to their own organizations, yet they do not apply the same logic when paying contractors—forcing smaller firms to finance their operations indefinitely.
The math of extended payment cycles is unforgiving for contractors operating on thin margins. When a small construction company completes a project worth $50,000 in material and labor costs, yet does not receive payment for 120 days, that firm must cover those expenses from its own cash reserves or credit lines. A single delayed project can destabilize a contractor's entire operation, preventing them from taking on new work, paying employees on time, or investing in equipment and growth.
This dynamic disproportionately impacts minority and women-owned businesses. These firms typically have less access to capital, thinner balance sheets, and weaker relationships with lenders than their majority-owned counterparts. As Cordell Sawyer explains in his episode of Forum Focus, what seems like a routine business practice to a large corporation can become an existential threat to a smaller firm.
The hypocrisy of cash flow logic
Large corporations fiercely protect their own cash flow—they negotiate favorable terms with suppliers, maintain working capital reserves, and structure their finances to ensure liquidity. They understand, fundamentally, that cash is operational oxygen. Yet those same corporations impose 120-day payment terms on contractors as if the contractor's cash flow constraints do not exist.
This represents a fundamental misalignment of values. If a corporation believes cash flow is essential to its own survival and growth, the logic should extend to its business partners. A contractor cannot build a $500,000 commercial project with 2% interest if they must wait four months to be paid. The risk is shifted entirely onto the contractor, who bears the cost of financing the owner's or general contractor's working capital.
The details of how this plays out on individual projects—from material procurement to labor scheduling—are explored in depth in this Forum Focus conversation, which reveals the cascading pressure these payment practices place on emerging construction firms.
Cordell Sawyer — Founder of Sled Rock Construction. Sawyer grew up in University City and worked as a janitor while reading books on wealth creation. He became one of the first apprentices to complete the carpenter's associate degree program through Balls Park Community College and was a union carpenter for ten years before founding Sled Rock Construction in 2009 during the recession. He built his business by investing carpenter wages into real estate, leveraging that equity to bankroll his construction company.
The broader implication is that extended payment terms function as an invisible barrier to entry for new and emerging contractors. They are not explicitly discriminatory, but they have a disparate impact on firms without deep capital reserves or credit access. A well-capitalized general contractor can absorb four months of unpaid receivables; a small MBE (Minority Business Enterprise) firm often cannot.
Changing this practice requires structural shifts—industry standards that reward faster payment, pressure from owners who demand ethical payment cycles from their contractors, and conversation and advocacy by construction leaders like Cordell Sawyer who have lived the damage firsthand.
See also
How can a small contractor build visibility and overcome the credibility gap in construction?
Cordell Sawyer turned the situation around by writing a strategic plan, joining trade organizations, attending all possible meetings and networking events, and leveraging relationships built over time to gain market presence.
What barriers do minority-owned construction companies face when entering new markets?
Cordell Sawyer explained that the natural assumption is that minority-owned small businesses do not know what they are doing, creating a significant hurdle to credibility and market acceptance.
What was the size and nature of the first commercial project for a startup construction firm?
The Love Travel Stop project on North Broadway in 2013 was the first commercial job, valued at $180,000 to $190,000, where the company performed most of the interior carpentry work.
Key takeaways
- 60, 90, and 120-day payment terms are now standard in construction but are deeply harmful to small and minority-owned contractors.
- Extended payment cycles force small firms to finance operations from their own reserves, destabilizing cash flow and limiting growth capacity.
- Large corporations understand the importance of cash flow to their own operations but do not apply the same logic to contractors they pay.
- Payment term practices create a hidden barrier to entry for emerging minority and women-owned businesses with limited capital access.