Won a big contract? How to fund the work before you're paid

There’s a particular feeling that comes with winning the biggest contract in your company’s history. Excitement first. Then, a day or two later, the arithmetic: materials to order, staff to put on, equipment to hire — and the first payment still weeks or months away.

A big contract is growth arriving in one lump. Funded properly, it can lift a business to a new level. Funded from the existing bank balance alone, it can squeeze everything else until the client pays.

Why does a profitable contract create a cash problem?

Because costs and payments run on different clocks. You pay suppliers on delivery or within 30 days. You pay wages weekly or fortnightly, and super goes out with each pay run. The client pays on its terms — which might be a progress claim at the end of each month, then 30 or 45 days to settle, with retention held until well after completion.

Put those timelines side by side and even a job with a healthy margin can put the business tens or hundreds of thousands of dollars behind at its deepest point. That deepest point is what needs funding.

How do you map the cash gap?

Build a simple timeline, weekly for short jobs and monthly for longer ones:

Column	What goes in it
Money out	Materials, subcontractors, wages and super, equipment hire, insurance, permits, mobilisation
Money in	Deposit, progress payments, final payment, retention release
Net for the period	Money in minus money out
Running balance	The cumulative total from the start of the job

The most negative number in the running balance column is your peak funding need. Add a buffer for a late payment — a month’s worth of costs is a sensible starting point for most jobs — and that’s the facility to arrange. business.gov.au’s cash flow resources include templates if you’d rather not start from a blank sheet.

A worked example (illustrative)

A commercial painting business wins a six-month contract worth $600,000 to repaint a school campus for a head contractor. Its margin on the job is about 30%, so the contract should produce roughly $180,000 of gross profit. The contract pays monthly progress claims 45 days after each claim, with 5% retention held until practical completion.

Mapping the timeline shows labour and paint costs of about $70,000 a month from month one, but the first payment (about $95,000 after retention) doesn’t arrive until the middle of month three. Just before it lands, the business is roughly $175,000 behind. Each later payment only just outpaces the costs building up behind it, so the running balance doesn’t climb back above zero until after the job finishes and the final progress payments arrive.

The owner arranges a $200,000 line of credit to cover the peak gap plus a buffer. With a quoted total cost of finance of around $12,000 over the life of the job, the contract still delivers well over $160,000 of gross profit after funding. Priced in from the start, the finance simply becomes one of the job’s costs.

Want to run your own contract through the numbers? Try the Growth ROI calculator with the payment delay as your ramp-up, then see if your contract qualifies for funding.

Which funding suits a big contract?

• Line of credit. Usually the best fit. Draw as costs arrive, repay as progress payments land, and only pay for what you use. See a line of credit for growth.
• Unsecured working capital loan. A lump sum for a defined contract, typically $5,000 to $500,000 for trading businesses, sized on turnover and bank statements.
• Property-secured loan. For large or long contracts — civil works, multi-stage builds, big supply agreements — where the peak gap is substantial. Available from $20,000 to $5,000,000.
• Supplier terms. Negotiating 60-day terms with your main supplier can shrink the gap before you borrow anything.

What will a lender want to see?

• The signed contract or letter of award, including payment terms and retention
• Your cash-flow timeline for the job
• Evidence you’ve delivered similar work (past contracts, references, a project list)
• Recent business bank statements and details of existing debts
• For larger amounts, property details if you’re offering security

The stronger the client and the clearer the payment schedule, the more comfortable a lender will be. A contract from a large organisation or government agency with defined payment terms is often easier to fund than an informal agreement.

How do you protect the business while delivering?

• Invoice on the day you’re entitled to. Every day of delay extends your gap.
• Stress-test payment timing. Model the job with each payment two and four weeks late. Our stress-testing guide shows how.
• Watch your other customers. A big contract can crowd out smaller, faster-paying work. Keep some of it going if you can.
• Mind the overtrading trap. Taking on too much at once is a classic way for a profitable business to run dry. Read about overtrading.

Turn the contract into growth, not stress

You won the work because you’re good at what you do. The right funding lets you deliver it without squeezing the rest of the business. Tell us about the contract, the payment terms and the gap you’ve mapped.

Sixty seconds on the form is all it takes to start, and your credit file stays untouched at that stage. Nobody else sees your enquiry — there’s no auction to a line-up of lenders. A specialist reads it and rings you to walk through the job, the payment schedule and the gap. Describe the contract and the amount precisely, and the right facility is much quicker to find.

See if your contract qualifies for funding →