Quick answer
Take the contract when the margin is healthy after all costs, the client is reliable, the payment terms are known, and you can fund the gap between paying your costs and getting paid. Pass, or renegotiate, when the margin disappears once finance and delays are counted, the payment terms are open-ended, or the job would starve your existing customers. The cost of saying no is the contract's profit plus any future work it would have led to.
Key points
- The funding need is the gap between your costs going out and the client's money coming in.
- Count finance as a job cost; if the margin survives, the contract is fundable.
- Unknown payment terms are a bigger risk than the size of the job.
- Saying no costs the profit and the relationship — price both.
The phone call every small business wants: a large client offers a contract that’s twice the size of anything you’ve done. Then the second thought arrives. How will we pay for the materials, the extra staff and the three months before the first invoice is paid? That thought decides whether the contract is an opportunity or a trap.
What does the contract really need from me up front?
Draw a simple month-by-month table of the job. Money out in one column, money in the other. Most contracts follow a pattern like this:
| Month | Money out | Money in | Running gap |
|---|---|---|---|
| 1 | Materials deposit, mobilisation, extra wages | Nothing yet | Deepest early |
| 2 | Wages, materials, subcontractors | First progress payment (if terms allow) | Still negative |
| 3 | Wages, materials | Payment for month 1 work | Starting to close |
| 4+ | Running costs | Regular payments | Positive if margin holds |
The deepest point of that running gap is your real funding need. Add a buffer for the client paying later than stated, because that is what large clients often do.
Does the margin survive once finance is counted?
Treat the finance cost as a job cost, exactly like materials. If the contract is worth $400,000 with a planned margin of $60,000, and funding the gap costs a few thousand dollars in total, the job still earns handsomely. If the margin is $12,000 and funding eats half of it, you are working for very little and taking on all the risk.
A few questions to ask before signing:
- Are there progress payments, or one payment at the end?
- Is there retention held back, and when is it released?
- What are the penalties for delay?
- Who pays for variations, and how quickly?
What does saying no cost?
This is the part most owners skip. Declining isn’t free. It costs:
- the profit on the contract itself;
- follow-on work from the same client;
- the credential of having delivered a job this size, which helps you win the next one;
- the momentum of keeping your crew or team fully employed.
Put the direct profit into our cost-of-waiting calculator as a one-off loss and compare it with the finance cost. If you routinely decline work because of cash flow, our page on turning away work is worth a read too.
Illustrative example: the fit-out package
Illustrative figures only.
A joinery business is offered a $260,000 package of fit-outs for a chain of medical suites, paid 30 days after each suite is completed. Materials and extra labour mean about $110,000 goes out before the first payment lands. The margin after all costs is around $52,000. The owner can’t carry $110,000 from cash without missing wages.
A working-capital facility covering the gap, repaid as each suite’s payment arrives, costs a small fraction of the margin. Saying no would leave the full $52,000 on the table, and the client already has two more sites planned. For this business, the contract is the opportunity; the gap is a financing problem with a clear repayment source.
Sitting on an offer like this? Find out what’s available before you answer the client.
When should I pass, or push back?
Pass or renegotiate when:
- payment terms are vague or “on completion” for a long job;
- the client has a reputation for disputes or late payment;
- the job would take so much of your capacity that regular customers would leave;
- the margin is thin even before delays.
Often the best move is not “no” but “yes, with progress payments” or “yes, with a materials deposit”. A good client will usually meet you partway.
How quickly do I need to line up funding?
Before you sign, ideally. The contract may have a start date that leaves little room. Gather your bank statements, the draft contract and a job budget now, so that once it’s signed the funding can follow without delay. Our guide to working back from your deadline sets out what takes time and what doesn’t. And if new staff are part of the plan, read hire now or wait.
What contract terms reduce the funding gap?
Before you sign, it’s worth asking for terms that shrink the gap you need to fund:
- A mobilisation or materials deposit paid at signing.
- Progress payments tied to stages rather than completion.
- Shorter payment terms — 14 days instead of 30 or 45.
- Clear variation pricing so extra work is paid promptly.
- Early retention release or a retention bond instead of cash retention.
Each one reduces the deepest point of your running gap, which reduces what you need to borrow and for how long. Even one of these can turn a stretch into a comfortable job.
Want to say yes with confidence?
If the margin survives and the client is solid, the only thing standing between you and a bigger year is the cash-flow gap. Tell us about it through our short enquiry form. No credit check is run when you ask. Your job details go to one team — not a mailing list of lenders — and a real person calls to work through the gap with you. Please give accurate figures for the contract value, timing and what you need, so we can find the right structure first go.
Frequently asked questions
How much working capital do I need for a big contract?
Map the job month by month: wages, materials and subcontractors going out, progress payments or invoices coming in. The deepest point of the gap is your funding need, plus a buffer for late payment.
Can I get finance before the contract is signed?
You can start the conversation and get your documents in order before signing, which shortens the time from signature to funds. Lenders will generally want to see the signed contract or purchase order before settling.
What if the client pays slowly?
Build their real payment behaviour into your plan, not the terms on paper. If you don't know their history, allow for payment later than stated and size the facility to cover it.
Is it risky to borrow for a single contract?
It is riskier if the contract is your only work, the client is unknown, or the margin is thin. It is much less risky when the client is established, the margin is healthy and the facility is repaid from the contract income.
What documents help with contract funding?
The contract or purchase order, a job budget, recent business bank statements, details of your existing debts and any ATO position. Property details help if you want a secured facility.