Quick answer
To fund a large contract before payments arrive, map the costs and payment schedule, then match funding to each need: equipment finance for new assets, invoice finance or a line of credit for wages and materials while invoices are outstanding, and property-secured loans for larger or riskier gaps. Check the contract's payment terms carefully and keep a buffer for delays.
Key points
- Map costs and payment dates before signing
- Match funding to each need: assets, wages, materials
- Invoice finance and lines of credit suit the timing gap
- Allow for delays in milestone and progress payments
The growth paradox
A big contract can transform a business. It can also strain it to breaking point. Staff need to be hired and paid, materials bought, equipment acquired and overheads covered, often for weeks or months before the first payment lands. Businesses that win the work without funding the gap sometimes find themselves unable to deliver, or forced into expensive borrowing at the worst moment.
Read the contract first
Before signing, understand exactly when and how you will be paid: deposits, milestones, progress claims, retentions, payment terms after invoicing and conditions attached to payment. Check what happens if work is delayed or the contract is ended early. These details decide how much funding you need and for how long.
Map the cash flow
Build a forecast covering the contract period: wages, materials, equipment, subcontractors, overheads and tax on one side; payments on the other, on their realistic dates, not the hoped-for ones. The cash flow gap calculator shows the lowest point your balance reaches. That depth, plus a buffer, is the amount to arrange.
Match funding to the need
New equipment for the contract suits equipment finance over the asset’s working life. Wages and materials while invoices are outstanding suit invoice finance if the client is a creditworthy business, or a line of credit. A one-off deep gap suits a short-term working capital loan. And larger or riskier contracts, or businesses with complicated credit, often suit property-secured loans anywhere from $20k to $5m, with interest prepaid or added to the loan so nothing is due until payments flow.
Allow for delays
Payments are often late, milestones slip and variations are disputed. Build a margin of time and money into your plan. Facilities that flex, such as lines of credit and secured loans with flexible terms, cope better with delays than fixed short-term loans with daily repayments.
Check the margin
A big contract at a thin margin can lose money once funding costs, overtime and unexpected costs are counted. Price the work with the cost of funding included.
Talk to lenders before you sign
The best time to arrange contract funding is before you commit. A lender can tell you what is achievable and what the contract terms mean for funding. Bring the draft contract, your forecast and your bank statements.
An illustrative example
A joinery workshop won a fit-out package for a new office building. The builder paid progress claims after each stage was certified. Equipment finance funded a new edge bander, and a line of credit sized on the workshop’s statements covered timber and wages through each stage, repaid as claims were paid.
Questions to ask before you sign the contract
What are the payment terms, and are they consistent with your cash position? Are there retentions, and when are they released? What happens if the client delays approvals or changes the scope? Can you invoice progressively, or only at milestones? Is there a mobilisation payment? Each answer changes the size of your funding gap, and some can be negotiated before signing. A modest change, such as fortnightly progress claims instead of monthly, can halve the amount you need to borrow.
Protecting the rest of the business
A large contract can crowd out smaller, more profitable customers if staff and cash are all pulled into it. Keep an eye on existing customers and make sure the funding plan leaves room for business as usual.
Fund your next win
Make a quick enquiry and tell us about the contract and its payment terms. There is no credit check for a first chat, a person checks it, and we keep it confidential. Fund your contract.
Frequently asked questions
Can I borrow against a signed contract?
Some lenders consider signed contracts, especially combined with invoice finance or property security.
How much should I borrow?
The deepest point of the cash gap shown in your forecast, plus a buffer.
What if the client pays late?
Build delays into the plan. Flexible facilities and secured loans with interest added cope better with late payments.
Should I fund equipment for the contract with a loan?
Equipment finance matched to the asset's life is usually better than short-term funding.
What if the contract is cancelled?
Check termination clauses and avoid committing to long-term costs without protection.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a person who handles unusual deals calls you back.