Bigger contracts, bigger gap
A large contract changes the shape of a business's cash flow. Before a single invoice can be issued, you may need to take on extra staff, buy materials in bulk, hire or buy equipment, pay deposits to subcontractors and cover insurance and site set-up. Then the first progress claim has to be submitted, assessed and paid, often 30, 45 or 60 days after the work is done. On big jobs, the gap between spending money and receiving it can be months.
The bigger the contract relative to the business, the bigger the risk. A contractor used to jobs worth a few hundred thousand dollars who lands a multi-million dollar contract can run out of cash while doing everything right. The contract is good. The business is good. The timing is the problem.
Why traditional finance does not fit mobilisation
Banks lend against past performance, not future contracts. A facility big enough to fund a contract that is larger than anything the business has done before is a hard sell to a bank credit team, and it commonly takes up to three months or more to approve, by which time work has started. Trade credit providers usually want years of financials and set limits based on past orders. Cash flow lenders often cannot lend enough and want repayments from week one, before any payment has come in.
How Equity Tap funds a contract
Equity Tap lends from $50k to $5m for one to twelve months, secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. The loan funds the upfront costs; the contract payments repay it.
- Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments while the job ramps up and the first claims are processed.
- The term is set around the contract, from one month to twelve months, so the loan finishes when the job's cash starts flowing.
- Repay from progress payments as they arrive, or in full from a later claim or the final invoice.
Interest is not waived. Each loan is priced on your individual circumstances, aiming for the sharpest rate available, with the full cost shown before you proceed.
A typical mobilisation cash flow
| Stage | Money going out | Money coming in |
|---|---|---|
| Weeks 1 to 2 | Equipment, materials, deposits, insurances | None |
| Weeks 3 to 6 | Wages, subcontractors, more materials | None; first claim submitted |
| Weeks 7 to 10 | Ongoing wages and materials | First progress payment, less any retention |
| Later months | Ongoing costs | Regular progress payments |
| Completion | Final costs | Final claim and later release of retention |
The funding fills the first few columns of "nothing coming in". Once progress payments are regular, the loan can be repaid from them. Our guide to working capital business loans explains this pattern in more detail.
Who uses contract funding
We see this most with builders, civil and earthmoving contractors, electricians and plumbers on commercial jobs, manufacturers filling a large order, labour hire firms taking on a big placement, and suppliers to government or major corporate customers. If you work in construction or trades, our industries pages cover sector-specific needs.
What we need, and what we do not
- ID for borrowers and guarantors
- Details of the property offered as security and any existing mortgage
- The contract, letter of award or purchase order
- A simple outline of upfront costs and the payment schedule
We do not need tax returns, BAS, profit and loss statements, an accountant's letter or bank statements for a property-secured loan. We do not order a valuation before approval, so you are not tied up meeting a valuer while trying to mobilise a crew. No credit check is made at initial assessment.
From award to funded
Call as soon as you know you have won the work, or even while you are tendering if proof of funding will help. Conditional approval can often be given on the phone and a term sheet issued in about 30 minutes once we have the scenario. Eligible loans can settle in as little as 24 hours. There is no credit committee, so you are talking to the people who decide.
For example, a civil contractor awarded a council roadworks package worth far more than their usual jobs might take a five-month loan secured by a second mortgage over their yard to buy materials and hire extra plant, repaying it from the second and third progress payments.
Plan for slow payers and variations
Large contracts bring disputes over claims, variations and retentions. Build that into the term. Terms run up to twelve months, so allow some room beyond your expected payment dates. If a principal starts paying late mid-job, see debtor paying late. Our guide to exit strategies helps you set a realistic term.
Brokers
If a client has won work that is bigger than their bank facilities, send the scenario through our broker page. A fast indicative answer helps your client commit to the contract with confidence.
Win the job and fund it
Apply online or call 1300 123 024 with the contract details. See also opportunity funding if the work is not yet signed.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Can I get a loan to start a big contract before I get paid?
Do you lend against the contract itself?
Will I need to make payments before my first progress claim is paid?
The contract is bigger than anything we've done before. Is that a problem?
Can you help before the contract is signed?
What about retentions and late payments?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.