![pp logo v1 ProjectPass helps subcontractors and materials suppliers get pre-qualified for capital intensive projects](https://chipi.works/wp-content/uploads/2022/03/pp-logo-v1.png)
Financial Prequalification Eliminated
![ONCE UPON A TIME](https://chipi.works/wp-content/uploads/2022/03/ONCE-UPON-A-TIME.png)
![Payment Waterfall Graphic Delays in construction payments are a result of top-down payments that stop at each project management level](https://chipi.works/wp-content/uploads/2022/03/PAYMENT-WATERFALL-IMAGE-1.png)
Risk was Managed Top-Down by Using Money as Leverage
Payments Stopped at Every “Management” Level
Creating Payments Delays
…But Small Businesses have Limited Access to Financing, especially those from Underrepresented Groups
![Limited financing Options SBE MBE and DBE have limited access to trade credit and are unbanked](https://chipi.works/wp-content/uploads/2022/03/limited-financing-Options.png)
![Primary Source of Funding Small Businesses Small Businesses have very limited access to external finance and banking](https://chipi.works/wp-content/uploads/2022/03/Frame-92.png)
…Resulting in a Dependency Upon Personal Savings and Retained Earnings
…and Profit Margins are Low which Means Small Construction Businesses Cannot Maintain Adequate Cash Reserves
14 days
Cash Buffer
for 89% of Hispanic and 94% of Black Businesses
source: JPMorgan Chase Institute
![Bonding Analysis Myth Understood Bonding Due Diligence Criteria](https://chipi.works/wp-content/uploads/2022/04/Frame-118.png)
![Bonding Due-Diligence Bonding Due-Diligence is much different in emphasis than common understanding](https://chipi.works/wp-content/uploads/2022/04/Frame-122.png)
…Making Performance Bonding Challenged since it’s largely based upon Financial Due-Diligence
![Reality of Bonding Due-Diligence Reality of Bonding Due Diligence is largely based upon capital and financing both of which are limited in availability for small and minority businesses](https://chipi.works/wp-content/uploads/2022/04/Frame-124.png)
![Construction Businesses Survival Rates Survival Rate of Construction Small Businesses by Year](https://chipi.works/wp-content/uploads/2022/03/Construction-Businesses-Survival-Rates.png)
source: US Bureau of Labor Statistics
Consequently, Survival is Unlikely
Payment Delays Create Cash Flow Gaps That Cannot Be Filled
…Which is a Problem for Everyone – Particularly the Developer
Financial Distress in Project Ecosystems Introduces Project Delays
62%
Project Delays
are Introduced by Poorly Capitalized Subcontractors (Prequalified)
![financial prequalification construction subcontractors and materials suppliers are compelled to complete prequalification documents](https://chipi.works/wp-content/uploads/2022/03/financial-prequalification.png)
Financial Prequalification Standards are Unrealistic and Complicated for Under-Resourced Small and Minority Businesses
Financial Prequalification is a Barrier to Entry
![Financial Inclusion Financial Inclusion has been identified as a major barrier to increasing wealth](https://chipi.works/wp-content/uploads/2022/03/Financial-Inclusion-2.png)
“Financial Inclusion” is the name of this Challenge
The Consensus is that Financial inclusion is a Key Enabler to Boosting Prosperity
Financial Inclusion will Attract and Grow a New Workforce Needed to Fill the Ongoing Shortage
650,000
2022 Workforce Shortage
source: Association of Builders and Contractors
![IN SUMMARY To summarize the challenge for small and minority small construction businesses, top-down waterfall payments create cash flow gaps that cannot be filled because businesses are underbanked and have very small cash reserves. This creates risk for the developer who address it by imposing unrealistic prequalification standards that act as a barrier to entry and limit the size and diversity of the workforce.](https://chipi.works/wp-content/uploads/2022/03/IN-SUMMARY.png)
Waterfall Payments Create the Very Problems Developers and GC’s are Trying to Avoid
![But Now, Introducing Introducing a new payment workflow that solves financing challenges for small construction companies by making payments direct to final beneficiary](https://chipi.works/wp-content/uploads/2022/03/But-Now-Introducing.png)
![Hub & Spoke Payments Hub & Spoke Payments solve payment delays](https://chipi.works/wp-content/uploads/2022/03/Group-1947.png)
Funders Make Fractionalized Payments direct to the final destination
![Hub & Spoke Payments In contrast to waterfall payments, hub and spoke payments release money directly to the final beneficiary. This avoids delays created by stopping at intermediaries](https://chipi.works/wp-content/uploads/2022/03/Frame-99.png)
![Local Approvals Local Approvals with Express Construction Payments](https://chipi.works/wp-content/uploads/2022/03/Local-Approvals.png)
“Direct-to-Final” Payments Maintains Existing Approval Processes with Programmatic Release
![Chipi's Approvals & Payment Workflow The cash flow requirements are filled by upstream team members such as the GC, Lender, or developer with direct and real-time payments to the value-chain endpoint such as the frontline sub or materials supplier](https://chipi.works/wp-content/uploads/2022/06/Chipi-Workflow-Overview.png)
Circumvents Financial Challenges Faced by Small and Minority Business with “In-Kind” Capital
![Capitalization Impact The impact on the capitalization of small construction subcontractors and materials suppliers completely replaces the need for external financing](https://chipi.works/wp-content/uploads/2022/03/Group-2027.png)
Circumvents Financial Challenges Faced by Small and Minority Business with “In-Kind” Capital
![Capitalization of Traditional Small Business Capitalization of Traditional Small Business is dependent upon credit cards and trade credit both of which are expensive and limits company size and growth](https://chipi.works/wp-content/uploads/2022/11/Frame-158-1.png)
![Capitalization of Small Business using Chipi Capitalization of construction subcontractors and materials suppliers INCREASES GREATLY so that they can access in-kind capital to expand production capacity and grow business operations](https://chipi.works/wp-content/uploads/2022/11/Frame-157.png)
![Invoice Value-at-risk is large The invoice value-at-risk in a construction budget is still large after using hub and spoke payments to fill cash flow gaps](https://chipi.works/wp-content/uploads/2022/03/Group-2028.png)
Hub & Spoke’s Fractionalized Payments Maintains Enough Invoice Value-at-Risk to Align Financial Incentives
![Typical Invoice represents 100% payment risk Typical Invoice represents 100% payment risk to subcontractors and materials suppliers creating cash flow problems and introduces project risks](https://chipi.works/wp-content/uploads/2022/11/Frame-159.png)
![Invoice risk after fractionalized payments Chipi's Fractionalized Payment workflow with direct-to-final destination payments addresses cash flow problems of subcontractors while also maintaining ENOUGH invoice VALUE-AT-RISK to maintain financial alignment of incentives](https://chipi.works/wp-content/uploads/2022/11/Frame-160-1.png)
![Eliminate Undesired Behavior Subcontractors engage in behaviors that are not in their interest or that of the developer as they attempt to manage scare cash flow](https://chipi.works/wp-content/uploads/2022/03/Group-2029.png)
![Poor Behavior of Subcontractors Solving cash flow and capitalization challenges for construction subcontractors and their suppliers eliminates undesired behavior such as bids based on credit availability versus prices, purchasing materials at the last minute to conserve cash, shifting production to faster paying customers, collaboration breakdowns, and choosing not to bid for work.](https://chipi.works/wp-content/uploads/2022/03/Cash-Flow-Hacks.png)
![BEAT THE COMPETITION FOR TALENT Use your payment workflow to BEAT THE COMPETITION FOR TALENT](https://chipi.works/wp-content/uploads/2022/03/BEAT-THE-COMPETITION-FOR-TALENT.png)
Use Hub & Spoke Payments as a Way to Compete for the Best Subcontractors and Materials Suppliers
![Diversity leadership for the Construction Industry Leadership On Diversity, Equity and Inclusion](https://chipi.works/wp-content/uploads/2020/10/leadership.png)