Two North Idaho women have launched a construction escrow service that they believe is unique to the Inland Northwest and that they hope will cut down on cases of subcontractors and suppliers not getting paid for the services they provide.

The co-founders, Crystal Wren, marketing and development manager, and Priscilla Routson, managing member, started C&P Construction Escrow LLC several months ago, and they say they haven't landed any work yet, but are negotiating with several prospective clients.

The escrow service is set up to assist contractors with fund disbursement to subcontractors and suppliers. It also aims to protect project owners from liens, a danger homeowners might not be aware of when they enter into a contract to have a home built or remodeled, Wren says.

The business is leasing about 800 square feet of space on the second floor of the Sky Professional Building in Coeur d'Alene, at 1044 Northwest Blvd. For now, not including contracted help it's receiving from an accountant, a lawyer, and a bonding agent, it has no employees other than the two co-founders, and it is a secondary, part-time endeavor even for them, because they both have other primary jobs. Wren has owned her own hydroseeding business since 2004, and Routson handles bookkeeping for several local construction companies. Wren refers to their sideline endeavor as "entrepreneurship on a shoestring."

"Within the next year I would like to be fully established in the Inland Northwest, and have a few banks and contractors we work closely with," Wren says. After that, she would like to see C&P expand beyond Coeur d'Alene and Spokane toward Boise and Seattle.

C&P expects to deal mostly with smaller construction companies and to be involved in projects ranging from landscaping and remodels to subdivisions and commercial buildings.

Wren has been involved with the construction industry for almost a decade, and Routson has been in the industry for about 14 years. They say witnessing acquaintances not receiving payments for services rendered, and not getting paid themselves, led them to team up and create a business that attempts to minimize such occurrences.

"You do a job (as a subcontractor) and cross your fingers that you get paid at the end," Wren says. "It's always been like that."

The process Wren is trying to kick-start begins with the contractor. Wren says she first sits down and informs the contractor of what they need to include in the business contract with the owner so the owner puts the project funding in escrow. The contract, Wren says, would also clearly specify how everyone would get paid—either weekly, on a performance basis, or by line item, meaning they would get a specific portion done, such as framing, and then get paid for that.

Wren says once the contract is negotiated, C&P would ask the contractor to provide it with a list of subcontractors, whose credentials C&P would verify.

"Once we can verify everything, the owner puts the money in a trust account or gives us permission to work with the construction loan at the bank," Wren says, meaning C&P is given permission to utilize any funds the owner has acquired through the bank.

After that's all complete, Wren says it boils down to contractors doing their job and submitting invoices. C&P then verifies that the work was completed, either through personal visits or through inspectors. Wren says once all of this is done, C&P puts together a lien release, which is signed by the subcontractors, and the money is released to all parties.

C&P is paid a percentage upon completion of service. She says the scale starts at 1 percent of the contract value, but depends on the size of the project. Wren says there's a minimum cost of $200 for small projects, and on multimillion dollar projects, C&P would negotiate the fee.

Wren says she and Routson were able to acquire a software package that is geared toward this process.

"If we can't get that lien release in or mark off that button, then it won't (allow the software user to) write that check," she says.

Wren says other escrow companies are doing basically the same thing C&P plans to do, but banks limit it to new home construction. C&P doesn't limit its escrow services to one type of construction.

Wren says there are a number of construction escrow services around the country, notably in Nevada and on the East Coast. She says in Las Vegas, most casino construction includes the use of a construction escrow service. This type of system is in place in California, but it's known as a voucher system, Wren says.

The types of liens found in the construction industry typically are mechanical or construction liens. This type of lien is used by contractors, subcontractors, laborers, and suppliers when payment isn't received.

Idaho state law says a mechanical lien can cover the cost of any unpaid labor, material, or equipment and only applies to private property.

"We've both seen how difficult construction is to get paid," Wren says. "It's not fair; it's destroying the system."

Wren says she completed a subcontracting job through her hydroseeding business in May and hasn't received full payment from the contractor.

"The contractors, they're just trying to survive, but subcontractors are suffering," Wren says.

Contractors typically operate by offering a personal guarantee, Wren says. Contractors get a bank letter from the owner saying the money is available, she says, but that doesn't guarantee the subcontractors will get paid.

In 2005, Routson started working for a Hayden-based construction and excavation company. Routson, who handled projects, bids, and taxes for the company, says she found herself unemployed when the company never received payment for a job.

"All the contracts were done, and everything was right and the guy never sent any money," Wren says.

Wren says the construction company went bankrupt shortly thereafter.

"If our money had been in some kind of trust account, we wouldn't have had to go through what we had to go through," Routson says.

Wren says not getting paid for two jobs could be enough to force some smaller contractors here to shut down.

"Unfortunately, this isn't a big metro area, and most of the businesses are family owned," she says.

She adds, "When the money was flying five years ago, it wasn't that big a deal (if payment wasn't received promptly) because it was flowing," Wren says. "Now, it's tight and it matters."

The U.S. Bureau of Labor and Statistics says about 5.5 million people were working in the construction industry as of May 2012, down from about 7.7 million prior to when the housing market crashed in late 2007.

Wren says although the numbers have stayed the same for some time, she is seeing a small amount of growth locally.

"We're seeing good signs," she says. "More home construction permits are being pulled. The economic indicator is probably Post Falls because it's growing so quickly."

C&P is able to operate in all of Idaho, where it is a certified disadvantaged business enterprise, and plans on being able to do business in Washington starting this month. Wren says it plans on becoming DBE-certified in Washington in a few months.

DBE Certifications are awarded to minority- and women-owned businesses. In Washington, this type of certification increases the opportunity for such business entities to get involved with federally-funded projects specifically.