The double hurricane that no one wanted caused a construction boom. This company ensures that it is financed

As Floridians across the state continue to recover from back-to-back hurricanes – both causing historic devastation – the construction industry is once again swamped with demand for contractors that is outpacing supply.

The losses from Hurricanes Helene and Milton, which both made landfall in Florida within two weeks of each other, are is expected to exceed $50 billion. While some of that estimate comes from western North Carolina — where Helene dumped record rains and caused catastrophic flooding that continues to ravage the region — and other states where the late September hurricane tore a path through Appalachia, Florida is already facing with a shortage of contractors and associated labor to take on the daunting task of reconstruction.

“Anytime a major storm comes through there will be an initial shortage and only some supply issues,” HMP Marine Construction Contractor Paul Printiss told WEAR News in Escambia County.

That was Printiss’ experience after just one major hurricane. Now the state is dealing with two damage in as many weeks. There is damage from wind – damaged roofs, cracked structures, fallen trees – and flooding. Tornadoes from Hurricane Milton also caused destruction in many places across the state, far from the worst impacts associated with the storm’s direct landfall.

How then can the state hold up?

“Our focus is on providing liquidity to the local contractors post-disaster so that they can complete the rehabilitation works for the affected city, province or state without credit constraints,” said ATLYS Global Managing Partner Frank Robinson said.

ATLYS Global, the owner and operator of the Federal Contractor Financing Program (FCFP), has done just that settled in Florida with a new solution to ensure that all contractors can participate in disaster recovery activities, regardless of company size or credit capacity.

Especially when federal programs are involved in recovery, getting reimbursed for recovery needs is not a quick task. It often leaves contractors in a position where they do the work and accept payment later. That’s something big companies can deal with. But smaller companies may not be able to cover costs associated with materials and labor.

That’s where the FCFP comes into the picture.

When a disaster strikes – whether a wildfire in California, a tornado in Kansas or a hurricane in Florida – the federal government allocates resources to ensure adequate recovery in the affected communities. Since 2017, Federal Emergency Management Agency (FEMA) Disaster Relief Fund allocations have totaled $223 billion.

Of those funds, only $114 billion had been disbursed as of February 2024. In Florida, more than $18 billion had been allocated and only $13 billion had been paid out, leaving contractors with a $5 billion bill. That begs the question: Is there $5 billion in contractor credit here in Florida to pay this bill? What about all the new allocations that will come from Helene and Milton on top of that $5 billion?

The FCFP focuses specifically on disaster response and recovery. It provides weekly financing to contractors performing work on projects related to government contracts.

The financing is not exclusively based on creditworthiness, but focuses on the mandatory repayment as the main source of collateral. The FCFP model also takes into account the sudden and significant demand for capital, especially given the significant costs associated with projects such as rebuilding entire communities or replacing complex infrastructure.

The FCFP is the only “non-recourse” financing solution on the market. The program has the capacity to lend billions of dollars annually, giving small businesses the opportunity to compete with much larger companies that maintain traditional lines of credit based on credit.

“What most people don’t know is that FEMA and HUD, the two largest amounts of disaster recovery funds appropriated by Congress, are reimbursable programs. That means an entity – perhaps the local government or a company, most likely the contractor – must carry out the work and bear the costs of the restoration in order to submit an invoice for reimbursement,” explains ATLYS Global CEO. Timothy Rope.

While ATLYS Global offers an innovative approach to solving the financing problem, it is a need that has existed for years, and lawmakers are aware of it.

In May 2020, the bipartisan Congressional Research Service (CRS) released an analysis of the 2009 American Recovery and Reinvestment Act. A recurring theme in the report related to the inability or latency in releasing federal funds for infrastructure projects.

The report concluded that these disbursement hurdles are directly related to the creation of new programs that require a new approach that takes advantage of available liquidity. For example, CRS found that infrastructure programs received only 9% of allocated funding in the first six months. The report noted that after 18 months, only 50% of the allocated infrastructure funds had been disbursed.

More simply put, contractors and subcontractors must spend out-of-pocket costs and wait an unknown amount of time before being reimbursed. Imagine a contractor working on a house and a homeowner telling him that he will definitely get paid at some point in the future, but he doesn’t know when. In disaster recovery, contractors are confronted with this dilemma every day.

For some main contractors and subcontractors, there is no capital available to cover costs. Some may have strong balance sheets but lack the ability to raise capital through traditional lending.

There is a shortage of service providers at a time when the state needs all hands on deck. And it has a trickle-down effect. Many large companies enter into contractual relationships with subcontractors on a ‘pay when paid’ basis. While that reduces financial risk for the big companies, it puts the cash burden on the shoulders of smaller subcontractors, who essentially swing the hammer.

“Too often, the major contractors, using their balance sheets and capabilities to maintain operations, pass the federal issue of deferred payments to the subcontractors. If the recovery is to happen faster, non-credit dependent liquidity solutions for subcontractors must be central,” Robinson said.

There is also local economic benefit in introducing smaller, local companies to the recovery market. While larger companies may be headquartered out of state, the smaller companies are more likely to keep their money local because they too are local.

“It is the best solution to enable local contractors in an affected area to participate by providing them with non-recourse liquidity,” Touhey said. “They are local. They were hit. They are capable and want to help. Let’s remove their biggest barrier to participating in the recovery efforts; the operational burden of waiting for federal reimbursement.”

Simply put, when a small business does well, it pays employees and even adds new employees, and that windfall is put back into circulation to benefit other local businesses. Think of employees grabbing a sandwich during their lunch break, or a beer from a local brewery after leaving the workplace.

The FCFP has provided more than $550 million in loans over the past five years.

The program is available nationally. In addition to Florida, the FCFP has made loans in Texas, New Jersey, Arkansas, California, North Dakota, Mississippi, South Carolina, North Carolina, Louisiana, the U.S. Virgin Islands and Puerto Rico.

In Florida, ATLYS Global hired and recently appointed the Ballard firm Ken Lawson to serve as Principal Director of the ATLYS Florida Business Center. Lawson, a Marine, previously served as executive director of the Department of Economic Opportunity, where helping Florida residents recover from Hurricanes Hermine, Matthew, Irma and Michael was a top priority.

In that role, he has gained firsthand experience not only in responding to disasters, but also in dealing with the challenge of finding enough crews to complete the work needed for the restoration.

Lawson described the challenge in a 2020 Florida Politics op-ed.

“States must wait for Congress to appropriate (Community Development Block Grant) funding. Then HUD must tell states how much they will receive for each disaster. Next, HUD must publish a federal record of how funding for that storm will work,” he wrote at the time.

Lawson went on to describe how each state must develop and submit a State Action Plan, and then the Department of Housing and Urban Development (HUD) typically has 60 days to review the plans before finalizing a grant agreement. Only after that agreement is reached can states begin distributing funds.

As you might imagine, it’s a lengthy process, Lawson said it could take up to six months.

“From my role as a state official, I have seen firsthand how heavy the financial burden of participating in disaster recovery can be on a contractor’s operations,” Lawson said. “It is so rewarding to lead a financial solution to, in my honest opinion, the greatest challenge this state faces in natural disaster recovery.”

While local, state, and federal policies and programs are continually working to adapt to new climate needs, including the prevalence of strong hurricanes, no amount of policymaking or funding can make the storms go away. Although FCFP leaders wish their program was not necessary, they are a team of pragmatists who know that this is the case, at least for now and for the foreseeable future.

“We can’t stop disasters, but we can help people recover faster and more effectively,” Robinson said.

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For more information about ATLYS Global and the FCFP program:

Website: Home | Atlys Global.

Contact Lawson at: (email protected).

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