You won the contract. Now you need to find the money to start it
Updated: 1 day ago
Finding the money to start a new contract means covering the bills that arrive before your customer's first payment, while keeping existing work funded.
The acceptance email arrives. Then the practical questions start. Who pays for recruitment, materials, software access and the first few weeks of delivery? A sizeable contract can look reassuring until you realise the first supplier deposit is due on Friday.
For an Australian business owner, the question is how to turn worthwhile work into paid work without stretching the business too far.
The short answer
The contract value is different from the cash you need to get started.
Customer and supplier payment dates determine the gap you must cover.
Agreed deposits or earlier milestones may reduce that gap.
Finance needs a repayment plan that allows for delays and existing commitments.
Need money to start? Work out the gap first
A large order might be delivered over a year, but its starting costs can land together. For a service contract, recruitment and training may happen before there are billable hours. For a supply job, materials may need to be ordered before the customer pays anything.
Put those costs against their actual due dates. Include materials, freight, licences, insurance changes, equipment hire, onboarding and payroll. Note which costs recur and which become unavoidable once you place an order.
Now follow the customer's payment process. Does the clock start at delivery, acceptance or invoice approval? Is there a month-end payment run? “30 days” may begin well after your team starts work.
The guide to calculating your working capital need helps turn that sequence into a funding amount. Include existing business payments because a new project does not put rent, wages and other contracts on hold.
When will the customer let you invoice?
Before booking people or ordering materials, confirm that the customer has authorised the work. Check the contracting entity, start date, purchase order requirements and any outstanding conditions.
If the price covers implementation but the client expects weeks of unpaid discovery, your starting budget may already be wrong. Agree what is included and how extra work is approved.
The government guidance on preparing a contract explains payment triggers and acceptable work. Your legal adviser can review the clauses affecting your cash exposure, particularly acceptance, changes, termination and payment rights.
A completed installation may still need a test report or customer inspection before you can invoice. Find out who signs it off and what they need. Include that time in your cash plan.
Can you change the payment sequence before borrowing?
There may be room to change when cash comes in.
A customer may consider an initial payment for starting costs, payment for completed stages or direct purchase of specified equipment. You need their agreement, and customer policy or industry rules may limit the options.
Make the proposal concrete. “Some money at the start” is hard to evaluate. Payment after an agreed onboarding package is delivered and accepted gives both parties something to check. Document the amount, evidence, approval process and deadline.
The government explanation of payment terms covers upfront, instalment and credit arrangements. Printing new terms on an invoice is no substitute for agreeing to change the contract.
If payment terms are fixed, could the customer agree to a smaller first rollout? That may need less starting cash, although the price and delivery costs may change too.
Can suppliers help spread the starting costs?
Suppliers may be willing to discuss staged deliveries, smaller initial orders or agreed credit terms before you commit. Compare the total cost. A smaller deposit might mean a higher price, while splitting a shipment can add freight.
Be careful about promising payment from a customer milestone that still depends on several approvals. Put both sides on one calendar, including time for acceptance and processing.
Could hired equipment cover the first phase? Could existing staff manage it without unsafe workloads or letting other customers down? Check the practical costs and employment obligations before assuming either approach saves cash.
These are useful ways to improve cash flow before borrowing. Together, they show how much outside funding you may still need.
What the gap could look like: an illustrative example
Suppose a service business wins a $180,000 project. Before its first customer receipt, it expects $18,000 of onboarding costs, $32,000 of staff payments and $10,000 of supplier charges. The initial cash requirement is $60,000, excluding other trading commitments in this simplified example.
It can allocate $25,000 without using the reserves needed for existing work. That leaves a $35,000 gap. The owner negotiates a genuine first-stage payment of $15,000, with delivery and payment expected before the remaining launch expenses fall due. If it arrives on schedule, the gap falls to $20,000.
Now test a delay. If acceptance takes another fortnight, the business may still need the full $35,000 temporarily, plus any extra costs during that period. The milestone only reduces the peak requirement when its payment timing supports the spending schedule.
This simplified example excludes GST timing and is not a funding recommendation. Build your own 13-week cash flow forecast around signed terms, actual commitments and tax payments.
Will the job still make money if things run late?
Check what remains after direct costs, a share of overheads, likely rework and funding expense. A healthy quoted margin can shrink if extra tasks are absorbed without an agreed variation.
Try a late customer payment and a cost increase in the forecast. Can you keep paying the business's other bills if both happen? The government cash flow guide explains how records and planning help identify pressure early.
If the job needs everything to go perfectly, revisit the terms or price before committing further. Where wider financial difficulty is emerging, ASIC’s guidance for company directors recommends seeking professional advice early. A new contract should not be assumed to solve existing losses.
Could finance cover the remaining gap?
Borrowing may help cover a defined starting gap where repayments are affordable. Approval and terms depend on the business, contract, security and existing obligations. A signed order does not guarantee access to cash.
Funding against completed invoices may not cover recruitment or materials needed before delivery. The invoice finance guide explains the distinction. Ask what can be funded before an invoice exists and what happens if the customer delays acceptance.
Take the contract, cost schedule, forecast and repayment assumptions to your finance broker. The guide to working capital finance applications explains the information a lender may assess. Confirm access before relying on finance to meet the start date.
A checklist before you commit the starting cash
Verify signed authority to start and outstanding conditions.
Confirm invoice triggers, acceptance evidence and payment deadlines.
Put project costs alongside existing business commitments.
Document negotiated customer and supplier changes.
Test delayed receipts, higher costs and the remaining profit.
Confirm any finance terms and access before placing dependent orders.
Frequently asked questions
Does winning a large contract make funding easier?
A credible contract may help explain the purpose and potential repayment source, but its value alone does not establish affordability. Assessment can include delivery capability, customer risk, existing debts and whether the payment conditions are achievable.
Can I ask for a deposit after the contract is signed?
You can propose a change, but the customer does not have to agree unless the contract provides otherwise. Have any accepted variation properly documented. Seek legal advice before changing performance or withholding work required under existing terms.
Can invoice finance pay for costs before I start?
Do not assume it can. Funding tied to eligible invoices may become available only after you have performed the work and issued the invoice. Ask about the period before then, including the conditions for accessing any proposed facility.
Should I decline work if I cannot fund the launch?
First examine pricing, delivery stages, customer payments and the remaining funding options. If the contract still threatens the business’s ability to meet commitments, get professional advice before proceeding. If already signed, consider your contractual obligations before deciding to withdraw.
Give the win a workable start
Before the first order goes out, know the largest cash gap, when it occurs and how you will cover it if payment slips. That gives you a firmer basis for negotiating, arranging finance and deciding what the business can deliver.
Preparing to Fund a New Contract?
Fairlane Finance can help you assess possible funding structures against your business’s cash-flow timing.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
