Funding a big contract before the first payment arrives

Key points

• Funds the gap between starting a job and getting paid for it.
• Size the funding to the payment schedule, not the contract value.
• A signed contract and a reliable client strengthen the application.
• Allow for late payments: big clients don't always pay on time.

How do you work out how much funding you need?

The contract value isn't the number. The gap is. Build a simple month-by-month table:

1: Costs out $120,000; Payments in $0; Running gap -$120,000
2: Costs out $95,000; Payments in $60,000; Running gap -$155,000
3: Costs out $90,000; Payments in $110,000; Running gap -$135,000
4: Costs out $70,000; Payments in $140,000; Running gap -$65,000
5: Costs out $40,000; Payments in $120,000; Running gap +$15,000

Illustrative figures. The biggest negative number, $155,000 here, plus a buffer for late payments, is what needs funding. That's a fraction of a contract worth well over half a million dollars.

What do lenders want to see?

Construction remains one of the sectors with elevated insolvencies, according to the Reserve Bank's October 2026 Financial Stability Review. Lenders will look closely at whether the job is priced to make money, so show your margin.

Illustrative example. A Townsville electrical contractor wins a $640,000 subcontract on a school upgrade, paid monthly in arrears with a 5 per cent retention. Materials and two extra electricians put the business about $150,000 behind at the peak, in month two. A line of credit with a limit of $180,000 covers the gap with a buffer, and is drawn down only as needed. Once the final claims are paid, the line falls back to zero, with the retention arriving months later as a bonus rather than relied-on cash.

• The signed contract and the payment schedule.
• Who the client is and their payment history, if known.
• Your track record delivering similar work.
• Your cash-flow plan showing the gap and when it closes.
• Bank statements and existing commitments.
• Retentions and variations and how you'll handle them.

Which contract terms change the funding picture?

Before you sign the contract itself, read it with the funding in mind. These clauses have a direct effect on how much cash you'll need and for how long:

If you're a subcontractor in construction, your state's security of payment legislation sets out rights around payment claims and timeframes. Knowing those rights can shorten the gap you need to fund. Your lawyer or industry association can point you to the rules that apply in your state.

Once the terms are clear, rebuild your month-by-month gap table using them. It's common for the real gap to be larger than the first rough estimate, and it's far better to find that out before the first truck rolls onto site.

• Payment terms. Thirty days from invoice is very different from forty-five days from the end of the month in which a claim is approved.
• Claim approval process. Who certifies progress claims, and how long they have to do it.
• Retentions. How much is held back, and when it's released. Treat it as money you'll see much later.
• Liquidated damages. Penalties for late completion can wipe out a margin.
• Security or bank guarantees. Some head contractors require a bank guarantee, which can tie up cash or borrowing capacity.
• Variations. How they're approved and paid. Unapproved variations are unpaid work.