Why are construction enterprises short of funds?


According to the supply and demand curve, the supply continues to increase, which will lead to further price reduction

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The essence of the construction industry is a service industry, which focuses on light assets

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Capital is the material basis for the enterprise to carry out all production, operation and management activities, an important prerequisite for maintaining the normal operation of the enterprise, and plays a vital role in the survival and development of the enterprise

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Although you are full of complaints, you can only accept it

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In the bottom logic of market economy, the profit of the supplier in large-scale supply is restricted

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Since the 13th five year plan, the CPC Central Committee has strictly controlled the construction of government buildings and restaurants

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The labor cost and machinery cost during shutdown are large

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Some regions also have special approval and filing matters, or require the competent department of housing and urban rural development in the place where the foreign enterprise is registered or its superior competent department to issue relevant certificates, or require the legal representative of the enterprise to go through the provincial (municipal) procedures, or unreasonable access conditions, or pre administrative conditions for commencement, It adds extra time and money cost for construction enterprises to undertake projects

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In particular, the housing construction market has become one of the industries with the highest degree of marketization in China, and the intensity of competition among enterprises is no less than close combat

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Therefore, there is a potential loss risk of the construction project when the contract is signed

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▌2

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In the era of more and less industry, the shortage of funds has become an important problem affecting the operation of construction enterprises and restricting the development of enterprises

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In terms of construction, facing the pressure of market competition, knowing that there are risks in advance, it’s good to receive the project when you think about more and less

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Relying on its own capital investment to drive the construction business can not solve the fundamental problem

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At the same time, due to oversupply, the construction party is in an active market position, that is, the buyer’s market

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The poor management of an enterprise, the decline of economic benefits and the loss of profits are often reflected in the capital turnover first

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From the beginning of the millennium, for the construction industry in the past 20 years, just as “this is the best era and the worst era” at the beginning of Dickens’s tale of two cities, China’s construction industry has never developed so vigorously as in the past 20 years

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At this stage, the number of “construction enterprises” producing construction commodities is still increasing

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▌2

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  Local government protection and related policies many local government departments set some capital thresholds for the purpose of supporting the development of local enterprises, protecting the economic interests of subordinate enterprises, increasing administrative revenue and tax revenue, such as paying a certain construction deposit, performance bond and wage deposit, which undoubtedly increases the capital pressure of construction enterprises

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Many construction enterprises obtain large-scale construction projects through a small amount of investment

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The policy adjustment has affected the market trend

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Before finding the answer to the problem of funds, we need to first clarify the source of the problem

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Developers without money need to find rich construction enterprises to advance funds for projects

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In the later stage of investment, it is very likely that due to the follow-up capital problems of the main investor, the construction party has to accept the whole project, occupying a large amount of funds of the enterprise and endangering its survival

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Advance has become an open “hidden rule” in the construction industry

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Some owners and construction parties refuse to accept the bank guarantee and use the security paid by the construction unit to pay the construction advance payment( 2) By reducing the quantities submitted by the construction party, changing the quantities of drawings and construction procedures at will, the construction cost increases( 3) Excessive supervision exists in the use of funds, which makes the construction unit rigid in the use of funds and unable to flexibly determine the use of funds( 4) In the settlement stage, the contract shall be signed, the quantities and corresponding progress payment shall be changed, and the approval link shall be deliberately increased to prolong the payment time of project funds( 5) The warranty owner and the construction party will withhold the high proportion warranty deposit and extend the warranty period

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The legal system in the construction field is not perfect, the credit system is not perfect, coupled with the imbalance between supply and demand in the construction market, and the arrears of project funds by construction units are increasing, which seriously restricts the normal development of construction enterprises

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  Requirements of the employer and payment of project funds during the whole construction process of the project, the employer may affect the capital situation of the construction enterprise at different stages in various ways: (1) before bidding, it is required to issue a letter of guarantee or pay a bid security; In the bidding stage, the price is lowered by virtue of competitive advantage; When signing the construction contract, it is required to pay the performance security

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At the same time, with the development of technology, leading enterprises in other industries have also entered the construction industry to get a share

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The leaders of many enterprises are trying their best to find ways to alleviate the capital shortage, so as to maintain the normal production of enterprises and enable enterprises to survive and develop in the severe construction market

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Why is there a shortage of funds? –   one  — External factors of fund shortage ▌ 1   From the perspective of market supply and demand, the current supply of construction commodities is greater than the demand

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Local governments have issued a number of environmental protection measures, which affect the normal and orderly construction of construction enterprises

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  With the increasing requirements of the regulatory authorities for the construction party’s project management, various fees also follow, such as label fees, civilized construction management fees, environmental protection fees and other non productive expenses increasing year by year.

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Due to the lack of practical and effective collection measures, the construction unit will delay if it can delay, and the final settlement is not completed for various reasons, or the final settlement price review organization is pending for a long time, so that the accounts receivable balance of the construction enterprise is getting larger and larger, the account age is getting longer and longer, and the funds can not flow into the enterprise normally, resulting in the weakening of the enterprise’s liquidity and affecting the normal capital turnover of the enterprise

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The state continues to increase construction investment and the scale of the industry continues to expand, bringing broad development space to construction practitioners

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At the same time, a large number of production funds are occupied free of charge, resulting in the blood of capital turnover

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In addition, defaulting on project payment has almost become a common operation in the industry

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There is a gap in the project funds of some construction units from the beginning of project initiation

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The number of construction enterprises in China has increased from 47000 in 2000 to 104000 in 2019

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Although the capital flow is large, the capital turnover of construction enterprises is still difficult

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Construction enterprises carry heavy burdens and operate with “shackles”, and their survival is threatened   two  — Internal factors of fund shortage ▌ 1   Advance construction has become a common phenomenon

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Capital is to the enterprise as blood is to the human body

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Another form of advance capital mobilization is the “pseudo investment” project driven by investment

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Out of the original characteristics of profit seeking, the construction party and the owner will use their advantageous position to set many overlord terms, and the construction party has to accept in order to undertake the project

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Even if the enterprise runs well, the profit space will be compressed under the background of the market (see the figure below)

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At the same time, the state adheres to the principle of “no speculation in real estate”, and has issued a series of real estate regulation policies to timely regulate and control the economic overheating behavior such as speculation in real estate and real estate, so as to eliminate the “real estate dependence”, which has affected the capital operation of real estate enterprises, As a construction enterprise in the downstream industry, its production and operation are also seriously affected and difficult

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In addition, the prices of concrete, gravel and other related ground materials are also increased, resulting in the continuous increase of material cost and the increase of capital pressure of enterprises

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In order to gain market share, some construction enterprises do not hesitate to press down on each other

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It seems to be investment, but it is actually advance capital

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In order to achieve the project establishment, the preliminary estimate is often calculated according to low standards, and then the construction party is required to advance funds

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With the continuous development of society, the society pays more attention to environmental protection

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However, behind the expansion of the industry scale is increasingly fierce competition

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. Magnetic Recess Former

Alibaba, which has mastered cloud technology and mature intelligent construction schemes, and Ping An, which holds a huge amount of funds, are undoubtedly a dimensionality reduction blow to many construction enterprises that have already faced the pressure of market competition and scale expansion

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