Progress payment and contract finance for builders and contractors

Winning a large contract feels like the hard part is over. Then the arithmetic arrives: crews must be paid weekly, suppliers want settlement on 30 days or cash on delivery, and the first progress payment might not land for six or seven weeks after you start. Progress payment finance exists for that stretch, when the work is real, the money is coming, and the bank balance hasn’t caught up.

What counts as progress payment and contract finance?

The label covers a few related facilities that lenders package in different ways:

• Progress claim funding. You submit a claim to the head contractor or principal, and a funder advances part of it now. When the claim is paid, the funder is repaid and releases the balance to you, less its fee. This is a construction-flavoured version of invoice finance.
• Contract or mobilisation finance. Working capital provided at the start of a job, sized on the contract value and your costs, to cover labour, materials, site set-up and plant hire until the first claims are paid.
• Contract-backed lines of credit. A revolving facility tapped and topped up as the project rolls on, sometimes secured over property or equipment as well as receivables.
• Bank guarantees and surety bonds. Not cash, but often needed to win the contract in the first place, as contract security in place of cash retention.

Many contractors end up using two together: equipment finance for the plant, and a receivables or working capital facility for the cash cycle.

Why are construction claims harder to fund than ordinary invoices?

An ordinary invoice says “goods delivered, pay this amount”. A progress claim is more contestable. The paying party can assess the work at a lower value, deduct back-charges for defects or delays, hold back retention, or set off amounts it says you owe on another job. If the principal or head contractor fails, the claim can be worth far less than its face value.

That’s why mainstream debtor financiers often exclude construction receivables, and why the specialists that do fund them advance a smaller share and look closely at the contract. It’s not a judgement on your business. It’s a reflection of how claims get paid in practice.

The legal backdrop: security of payment laws

Every Australian state and territory has security of payment legislation. The details vary, but the core idea is the same: if you carry out construction work or supply related goods and services, you have a statutory right to make progress claims and a fast adjudication process when claims go unpaid.

NSW is a useful reference point. According to the NSW Government, contractors can claim progress payments whether the contract is written, verbal or silent on the point, and even if the contract tries to exclude them. Where the contract sets no deadline, the maximum payment times after a claim are:

Who pays whom (NSW)	Maximum time if the contract is silent
Principal to head contractor	15 business days
Head contractor to subcontractor (non-residential)	20 business days
Head contractor to subcontractor (residential)	10 business days

A party that won’t pay the full claimed amount must serve a payment schedule explaining why, generally within 10 business days of the claim. The NSW page is clear that the Building Commission doesn’t chase debts for you, so the adjudication process is your lever.

Funders like these rights because they make claims more collectable. If you can show a clean record of claims being scheduled and paid on time, you’ll get a better hearing than a contractor whose history is full of disputes.

What lenders check

Funder’s question	What’s behind it
The paying party	A strong head contractor or government principal makes claims more bankable than a thinly capitalised builder
The contract	Payment terms, retention, liquidated damages, set-off clauses and any ban on assigning receivables
Claim history	How often claims were reduced, disputed or paid late on past jobs
Your track record	Experience completing similar-sized work on time and on budget
Work in progress	Costs to complete versus what’s left to claim, so the job stays solvent
Existing security	Who already holds a GSA or charge over your receivables and plant
ATO position	Tax debt is common in construction; it’s assessed case by case, not an automatic no

Have your contract, last few payment schedules and an aged receivables report ready. They’ll answer most of a funder’s early questions.

Need to fund the front end of a new job? Start a quick enquiry and someone who knows how claim cycles work will review it. Your credit file isn’t touched when you ask.

Sizing the facility: a worked example

A Melbourne commercial painting contractor signs a $1.4 million subcontract on a mid-rise apartment project, with monthly claims, 5% retention and the head contractor paying 20 business days after each claim.

• Monthly costs at full production: about $160,000 in wages and materials.
• Timing: claim one is lodged after four weeks on site and cleared roughly a month after that.
• The gap: the contractor will fund around two months of costs, about $320,000, before cash flows in steadily. Retention of $70,000 won’t come back until well after completion.

The owner has $90,000 of spare cash. A claims-based facility covering a share of each approved claim, plus a modest working capital limit for the first month, closes the remaining gap without tying up the family home. A cash flow gap calculator helps rough out these numbers before you speak to anyone.

What does it cost?

Costs depend on the facility type and the risk in the contract. Expect some mix of establishment fees, a discount or fee on each claim funded, interest on drawn balances, and sometimes a facility or line fee. Construction-specific funders charge more than a bank because of dispute and set-off risk.

We never publish rates. Compare offers on total dollars across the project, including what happens if a claim is paid late or reduced. Our loan cost comparison calculator helps line up offers on that basis.

Pros, cons and alternatives

What works well

• Lets you accept bigger jobs without draining reserves
• Repayment is tied to claims being paid, so it tracks the project
• Can be arranged without property in some cases

What to watch

• Disputed claims and back-charges can leave you owing the funder
• Contract clauses can prohibit assigning receivables, so check before you sign
• Advances shrink if the paying party’s credit weakens

Other routes: a secured business loan or line of credit over property often costs less for longer projects; equipment finance keeps plant purchases off your working capital. Our pages for builders and on funding a large order cover the wider picture.

Your contract, funded properly

A signed contract and a stalled bank account is a frustrating combination, and it’s one we deal with regularly for trades and contractors of every size.

Getting started is quick: our form is a short set of questions most contractors get through in about sixty seconds, and making an enquiry doesn’t show up as a credit check. Nobody on our side forwards your job details to a string of financiers. A specialist reviews the contract value, who’s paying you and the timing, then rings you to talk about it. The more accurately you describe the contract terms and claim cycle, the faster we can match a facility that actually fits the job.

Get funding lined up for your contract →