How do I check a builder’s line of credit with building supply yards?

Supply yard credit often works quietly behind the scenes. A builder may buy materials on account, pay monthly and rely on that credit to start new jobs before the client pays. Ask for the latest statement from each yard, with the limit, current balance and any amount past due. Note whether any account has been put on hold in the past.

Match the statements to the books. The payables in the financial statements should line up with what the yards say is owed. If they do not, find out why. Ask whether the builder has been paying late, negotiating terms or changing yards to avoid a collection call.

Then ask who stands behind the credit. Some accounts are personally guaranteed by the owner, and a guarantee does not simply disappear in a sale. Your lawyer can tell you how the accounts are handled at closing, and whether yards will extend the same credit to you. A look at the builder’s credit report and the owner’s payment habits can add context, though your accountant should advise on what to request. Also ask a few yards how they see the builder compared with others they serve. A yard that quietly tightened terms can tell you something the builder’s statements never will, and it costs only a phone call.

Key takeaways

• Collect statements showing limit, balance and overdue amounts from each yard.
• Match yard balances against the payables in the books.
• Ask whether the owner personally guaranteed any account.