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  • Writer's pictureStaveley and Partners

Why you should never fund your own construction claim

Claims are a common part of working in the construction industry, not because people are predisposed to doing anything wrong but because there are so many variables on a project, disputes are almost inevitable.

Inevitable or not however, resolutions can take time, and consequently money, to process. That could be money with an endless number of zeros on the end, and which could be better spent in other areas - winning new business, for example.

Therefore, if you're not going to spend funds on an almost inevitable part of a construction project, how can you go about handling it effectively? The answer is non-recourse claims funding. Furthermore, in using it we wouldn't simply say it's an option to make claims more affordable but it's actually the preferable and more business savvy option for a successful business running one or more construction projects.

In this article we discuss some of the key reasons you should not fund your own construction claim, and instead should opt for a reputable claims funding service.

You don't have to find money

Firstly, and most obviously, utilising a claims funding service means that you don't have to find the money to resolve the claim yourself. If you have a claim to address then the likelihood is that there's already a financial implication to the situation you're in. However well funded you and your team may be, no good business wants to spend money on something that's purely cost with no guarantee of a positive outcome.

You have a committed partner

In normal circumstances if you have a claim against you or against someone else, then you seek the support of a claims consultant and pay them a fee for their services on an open-ended basis. They get paid by the hour regardless of the outcome. With a no-win, no-fee funding service, your claims consultant becomes an invested partner. They are fully committed to a successful outcome and have a vested interest in it. If they agree to work with you, the likelihood is that you have a very good chance of achieving a resolution in your favour.

You don't have to expense the consultant fees or the full value of the claim

Even a wealthy contractor should consider opting for claims funding because of the further financial consequences of having an outstanding claim. If you go the regular route of paying a claims consultant, then you will have to make a full expense through your profit and loss accounts for the consultancy fees as well as the injury amount because your auditor will want to make a provision for it until the monies are recouped. However, if you have a claims consultant who commits to charging you nothing unless you win the claim, then your auditor, knowing the rules, and recognising that the accounts need to represent a true and fair view of the company’s position, will be able to make a provision for significantly less of the damage and without any consultancy fees. Now your accounts are up by that amount for the year, and as your company value is usually a multiple of that figure, so is its value. The net result is that you get a lot more value and a lot less stress for your money.

You have a better chance of settling more swiftly

What most companies want when faced with a dispute is to resolve it quickly so they can move on. Time is money when it comes to construction claims, and one of the benefits of having a claims consultant who has taken the risk on the outcome is that it sends a strong signal about the voracity of their commitment to and belief in your case. If the opposing side becomes aware of that situation, they are likely to consider their position and may well agree to a settlement more swiftly than they would normally.

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