Quick answer
To fund a big contract before the first payment, map the cash gap week by week from first spend to first receipt, then choose a facility that covers the gap with a buffer. Short gaps suit a line of credit or working capital loan; invoice finance can release cash once claims are approved; and larger or longer gaps may need property-secured funding. Lenders will want the signed contract, payment terms and your bank statements.
Key points
- Map the gap week by week before you sign.
- Size the facility for the deepest point of the gap, plus a buffer.
- Use the contract's payment terms to choose the facility.
- Invoice finance can recycle cash once claims are approved.
- Negotiate deposits and milestone payments where you can.
Winning a big contract should feel like a breakthrough, and it is. But for many companies, the elation lasts until they look at the cash flow. Materials have to be bought, staff paid, subcontractors engaged and equipment hired, often for weeks before the first invoice is even allowed to go out. The bigger the contract relative to the business, the deeper the hole between spending and getting paid.
This guide walks through how to plan for that gap and fund it safely, so the contract builds the company rather than breaking it.
Step one: map the gap honestly
Before talking to any lender, build a simple week-by-week cash flow for the contract. In one column, list every cost and the week you’ll pay it: deposits to suppliers, materials, wages, subcontractor invoices, equipment hire, insurance, travel. In another, list every payment you expect to receive and the week it will actually land in your account, not the week you invoice.
Then add your existing business. The new contract doesn’t replace your normal costs and income; it sits on top of them. Running the two together shows the true position.
The result is a curve. Cash goes down as you spend, bottoms out somewhere before the first payments arrive, then recovers. The lowest point on that curve is the most important number in the whole exercise. It tells you how much funding you need. The distance from the start to the recovery tells you how long you need it.
business.gov.au has a free template for setting up a cash flow statement if you want a structure to start from.
Step two: add a buffer for reality
Contracts rarely run exactly to plan. Clients approve claims late, materials go up in price, a supplier asks for payment upfront, or the weather costs a week. A sensible plan adds a buffer to the lowest point of the curve, and assumes payments arrive a little later than the contract says.
How big a buffer depends on your industry and your client. If the client has a long history of paying on time, a modest buffer may do. If you’ve never worked with them, or the industry is known for slow payment, be more generous. Borrowing slightly more than you need is far cheaper than running out of cash halfway through the job.
Step three: read the payment terms closely
The contract’s payment terms shape which funding fits. Look for:
- Deposits or mobilisation payments. Any money upfront reduces the gap.
- Milestone or progress payments. Regular claims shorten the gap compared with payment on completion.
- Payment period. Thirty days from invoice is very different from sixty days from approval.
- Retentions. Amounts held back until completion or after the defects period stretch the gap further.
- Approval process. Who approves claims, and how long that usually takes.
If any terms are still negotiable, this is the moment. Even a small deposit or shorter payment period can reduce the funding you need significantly. Our guidance for trades and construction covers progress claims in more detail.
Step four: choose the right facility
With the size and length of the gap known, the choice becomes clearer.
Line of credit. Ideal when costs and payments arrive in waves over the life of the contract. You draw down as costs hit and repay as payments arrive, only paying for what you use. See business lines of credit.
Short-term working capital loan. Suits a defined, one-off gap, such as the first eight weeks before regular claims start. You receive a lump sum and repay over a set term. See short-term working capital loans.
Invoice finance. Once invoices or claims are issued and approved, invoice finance can release most of their value quickly, which recycles cash into the next stage of the job. It works best when the client is large and creditworthy. See invoice finance.
Property-secured funding. If the gap is large relative to your turnover, or the contract runs for many months, a second mortgage or equity release can provide a bigger, longer facility with lower regular repayments.
Supplier and equipment finance. Trade accounts with longer terms and equipment finance for any machinery bought for the job reduce the cash you need from other sources.
Often the best answer is a combination: a line of credit or short-term loan for the start-up phase, then invoice finance once claims flow.
Step five: prepare what lenders will ask for
A lender assessing contract funding will typically want the signed contract or letter of award, details of the client, the payment terms and claim schedule, your business bank statements, your cash flow plan for the contract, and details of existing debts. For larger amounts, add financial statements and an aged debtors list.
Your cash flow plan is particularly valuable. It shows the lender you understand the job and have thought about risk, and it answers the most important questions before they’re asked.
Protect your margin
Funding has a cost, and that cost should be factored into the contract price. Before you sign, estimate what the funding will cost over the expected period and make sure the job still makes a worthwhile margin afterwards. If it doesn’t, that’s a sign to renegotiate terms, adjust the price or think carefully about whether the contract is right for the business at this stage.
Watch for scope creep, too. Variations that are carried out before they’re approved add cost without adding cash, and can quietly widen the gap.
What can go wrong, and how to plan for it
The most common problems are a client who pays late, a disputed claim, a cost blowout and a supplier who changes terms. For each, decide in advance what you’d do: draw further on a buffer, escalate the claim, pause work on variations or switch suppliers. Talk to your lender early if the plan starts to slip. Early conversations open far more options than a call on the day a repayment is due.
A worked example
A Brisbane joinery business wins a contract to fit out a new medical centre. The contract is worth roughly three months of its normal turnover, with monthly progress claims paid thirty days after approval. Mapping the gap shows the company will spend heavily on timber, hardware and wages for about seven weeks before the first payment lands, then reach a steady rhythm.
The owners arrange a line of credit sized to the lowest point of the gap plus a buffer, and an invoice finance facility to take over once claims start. They also negotiate a small mobilisation payment, which reduces the line of credit they need. When the second claim is approved late, the buffer absorbs it. By month four, the line is cleared, and the company has a reference project that wins it the next two jobs.
Before you sign the contract
A quick checklist helps. Have you mapped the gap with your existing business included? Have you added a buffer? Do you know which facility you’ll use and has a lender indicated it can provide it? Have you priced the funding cost into the job? Do you have a plan for late payments and variations? If the answer to each is yes, you’re in a strong position to say yes to the contract with confidence.
Get your contract funding in place
Tell us about the contract, the payment terms and the gap you need to cover through our short enquiry form. There’s no credit check to enquire, your file stays with one team, and a real person will help you choose the facility that fits the job before you sign. Tell us about your contract.
Frequently asked questions
Can a lender fund me on the strength of a contract alone?
Rarely on the contract alone. Lenders look at the contract alongside your trading history, bank statements and the client's reliability. A signed contract with a strong client makes the case much stronger.
What if the client pays later than the contract says?
Build a buffer into the facility for late payments. If late payment becomes a pattern, raise it with the client early and with your lender, so the facility can be adjusted.
Is invoice finance useful on a new contract?
Yes, once invoices or claims are issued and approved. It won't cover the very first weeks of spend, so it's often paired with a line of credit or short-term loan.
Should I ask the client for a deposit?
If the industry allows it, yes. A deposit or mobilisation payment reduces the gap you need to fund and shows the client is committed.