Funding a major contract before the first payment lands

Why do big contracts strain healthy businesses?

A large new contract is exactly what an established SME works for — and exactly the moment its cash flow is most exposed. Before the first dollar is received, the business hires or reassigns staff, buys materials, leases or buys equipment, lifts its insurance, and sets up the site or service. Wages, super and suppliers must be paid on their normal cycles. The customer pays on its cycle, which is usually slower.

The result is a funding curve: cash goes out steadily from day one, the first receipt lands weeks or months later, and the cumulative deficit keeps growing until receipts catch up with costs.

How do you map the contract’s cash curve?

Build a weekly forecast for the contract alone, separate from the rest of the business.

Week (illustrative)	Costs out	Receipts in	Cumulative position
1–4	Recruitment, equipment, materials, wages	—	−$420k
5–8	Wages, materials	—	−$760k
9	Wages, materials	First claim paid (late)	−$610k
10–16	Ongoing	Monthly claims	Trough around −$840k, then improving
20+	Ongoing	Receipts exceed costs	Cash positive

Illustrative only; no real business or contract. The trough — the deepest cumulative deficit — is the funding need, plus a buffer. Notice that it often arrives after the first payment, because the first claim covers only part of the costs incurred to date.

The working capital cycle calculator is useful for the steady-state position once the contract is running. For the mobilisation period itself, the weekly curve is essential.

What payment timing should you assume?

Assume what the customer actually does, not what the invoice says. The Payment Times Reporting Regulator reported in February 2026 that the average number of days large businesses take to pay 95% of their small business invoices rose from 58 to 64 days. If your customer is large, a 30-day term on paper can easily mean a 60-day reality.

Also allow for:

• claim approval cycles and certification delays
• retentions held back until practical completion or defects liability ends
• disputes on variations
• your own payroll rhythm — from 1 July 2026, super guarantee contributions must reach employees’ funds within 7 business days of each payday, so super now moves in step with wages

What funding structures work?

Revolving working capital facility. Drawn as the curve deepens and repaid as receipts arrive. Suits contracts with recurring monthly claims. See working capital facilities.

Term facility for mobilisation capex. Equipment and set-up costs that will last beyond the contract should sit in term debt.

Property-backed limit. Where the trough is large relative to the business’s current facilities, property security from $20,000 to $5,000,000 provides the capacity and tolerance for payment delays.

Unsecured cash-flow facility. For smaller contracts, typically $5,000 to $500,000 sized on turnover and bank statements.

Ledger funding once invoiced. Can help with the back end but doesn’t fund pre-invoice costs; progress claims may be ineligible. See debtor finance alternatives.

Tendering now? It’s worth knowing the funding position before you price. Share the contract outline with a specialist.

What will a lender want to see?

• The contract or letter of award, including payment terms and retentions
• Your weekly cash curve for the contract
• Evidence you’ve delivered similar work before
• The customer’s identity and payment track record
• Current financials and bank statements
• Any bank guarantee or performance security requirements

Concentration: the risk that comes with the prize

A contract big enough to need mobilisation funding can quickly become a large share of revenue. That brings its own risks — pricing pressure, dependency, and a hole if the contract ends. Lenders look closely at it, and so should you. Our guide to customer concentration risk explains how to present and manage it.

If the contract is part of a broader step up — new premises, a new region, more staff across the board — see expansion capital.

How should you price the working capital into the contract?

Mobilisation funding has a cost, and so does carrying a large customer’s debtors for months. Many SMEs price a major contract on labour and materials alone, then discover the finance cost has eaten the margin. Before you submit a price:

• Estimate the average funding balance over the contract’s life, not just the trough. A curve that peaks early and recovers quickly costs less than one that stays deep.
• Cost the finance on that balance for the expected period, including establishment costs spread over the contract.
• Negotiate the levers. A mobilisation payment, fortnightly rather than monthly claims, shorter payment terms or a reduced retention can shrink the curve dramatically — and some are worth more than a higher rate per unit.
• Model the variations. Variation work is often paid later than base work; if variations are likely, fund them.

Large customers may not move on price, but they sometimes move on terms, particularly when the supplier explains the cash-flow impact clearly. Even one improvement — a mobilisation payment of a small share of contract value, for example — can reduce the peak funding need and the cost of carrying it.

Funding the contract you’ve won

Bring us the contract value, payment terms, your estimated trough and the security available. We’ll tell you what’s fundable and how to structure it so the rest of the business keeps trading normally.

There’s no credit check just for enquiring. Your contract details aren’t passed around a panel of lenders — one specialist reviews them and approaches the right funder. Please be as accurate as you can about the contract value, the payment terms and the trough, because those numbers size the facility. See if you qualify for mobilisation funding.