Quick answer
When a large contract means paying for materials, labour and equipment well before the client pays, a business line of credit is usually the best fit: you draw as costs land and repay as each progress payment or invoice is paid. A short unsecured loan suits a single mobilisation cost. Property-secured funding suits very large contracts or newer businesses. Always check the client's payment terms first.
Key points
- Contract costs usually land weeks or months before the first payment.
- A line of credit tracks progress payments better than a lump-sum loan.
- Check the client's payment terms and history before you commit.
- Price the cost of finance into your quote.
- Our pick
- Business line of credit
- Runner-up
- Short unsecured loan for mobilisation
- Before you sign
- Check the client's payment terms
Winning a contract twice the size of anything you’ve done before is a great day. Then the maths arrives. Materials need ordering, extra staff need paying, maybe a machine needs hiring, and the client pays 30, 45 or 60 days after each claim. The bigger the contract, the deeper the hole before the money comes back.
Where does the cash gap come from?
On most contracts, money flows out in this order:
- Mobilisation: equipment, insurances, permits, site setup.
- Materials: ordered ahead of each stage.
- Labour: paid weekly or fortnightly, with super paid alongside wages under payday super from 1 July 2026.
- Subcontractors: often on their own short terms.
Money flows in only after you submit a progress claim or invoice and the client’s payment terms run out. The business.gov.au payment terms guide notes common business-to-business terms of 7, 14, 21 or 30 days or more, and with large clients, longer is common.
Which structures fit contract work?
| Test | Line of credit | Short unsecured loan | Property-secured loan | Asset finance |
|---|---|---|---|---|
| Matches staged costs | Yes | Partly | Partly | No |
| Suits | Multi-stage contracts | One upfront cost | Very large contracts, newer firms | Equipment needed for the job |
| Security | Director guarantee | Director guarantee | Property | The equipment |
| Reusable for the next job | Yes | No | Possibly | No |
| Watch | Limit creep | Fixed repayments before payments land | Property on the line | Gear outliving the work |
Our verdict on contract funding
Our verdict: a line of credit that tracks your progress claims
- Best for
- Builders, trades, manufacturers and service firms with a few years of trading taking on a larger job paid in stages.
- Not for
- Contracts priced so tightly that the finance cost wipes out the margin, or clients with a record of paying late.
- Check before you sign
- The contract's payment terms and retentions, the facility's fees on the limit, and how quickly you must repay drawn amounts.
A line of credit wins because contract cash flow rises and falls in steps. You draw to buy materials for stage one, repay when stage one’s claim is paid, then draw again for stage two. You’re not paying for a lump sum that sits idle between stages, and the facility is there for the next contract.
A short unsecured loan is the runner-up when the big cost is upfront and one-off: hiring a crane for the duration, buying site amenities, or paying a mobilisation cost.
Property-secured funding comes into play when the contract is very large relative to the business, or the business is too young for statement-based limits to stretch far enough.
If equipment is part of the job, consider asset finance for the machine and keep the line of credit for running costs. You can run the Loan Finder or ask a specialist about the contract.
Illustrative example: a shopfitter’s biggest job yet
Illustrative only. A shopfitting business that usually runs jobs of a few weeks wins a contract to fit out several stores for a retail chain over four months. The client pays 45 days after each store’s practical completion.
The owner maps the cash flow: joinery materials and labour for store one, then store two starts before store one is paid. At the widest point, the business is carrying costs for two and a half stores. She sets up a line of credit sized to that gap plus a margin, draws as each store’s costs land, and repays as each payment arrives. Two extra installers are hired on fixed-term contracts.
Verdict for this owner: a line of credit sized to the peak gap, with the finance cost priced into the quote.
What should you do before you sign the contract?
- Check how the client pays. The Payment Times Reporting Scheme publishes a register where you can search payment times reports for larger businesses.
- Map the cash flow. Use a monthly cash flow forecast to find the widest gap between costs and payments.
- Price the finance in. If you’ll borrow to deliver, that cost belongs in your quote. Our guide to pricing finance into a big job explains how.
- Watch for overtrading. Taking on too much at once is a common way growing businesses run out of cash. See the warning signs.
For the structure, see our business line of credit verdict and the line of credit versus term loan head-to-head.
What do lenders want to see for contract funding?
When a facility is tied to a specific contract, lenders typically ask about:
- The contract itself: value, scope, payment terms, retentions and the client.
- Your track record on similar work, even if smaller.
- Your cash flow map showing the peak gap and when it closes.
- Existing commitments: other jobs, other debts, and how this contract fits alongside them.
- Security: whether property or equipment can support a larger facility.
Having these ready, clearly laid out, usually makes the conversation shorter and the outcome better.
Ready to deliver it?
Don’t let the timing of payments decide whether you can take on the work. Tell us about the contract: its value, the payment terms and your current trading, and a specialist will help you line up the right facility.
Enquiring carries no credit check, and nothing you send is circulated to a pool of lenders. An accurate picture of the contract and your cash flow lets us size the facility to the real gap rather than a guess.
Frequently asked questions
Can I get finance based on a signed contract?
A signed contract helps show where repayments will come from, but lenders still look at your business's trading, your security and the client's ability to pay. It strengthens an application rather than replacing the usual assessment.
Should I fund a contract with a line of credit or a loan?
If costs and payments arrive in stages, a line of credit usually wins because you only draw what each stage needs. If there's one large upfront cost, such as equipment or a mobilisation fee, a defined loan can be simpler.
How do I find out how quickly a large customer pays?
Ask, and check the contract's payment terms. For larger businesses, the Payment Times Reporting Scheme register lets you search published payment times reports.
Should the cost of finance go into my quote?
Yes. If you have to borrow to deliver a job, that cost is part of delivering it. Our guide to pricing finance into a big job shows how.