You've got signed contracts or purchase orders: what they can fund

Winning a big job is the best problem a business can have, and sometimes the hardest to afford. The customer wants delivery; your suppliers want payment up front; your own invoice won’t be paid for another two months. The signed contract is a promise worth real money, and some funders will lend against that promise directly.

What do funders look at when a contract is the starting point?

With an order or contract, the funder is underwriting a deal, not a general business. The questions go to the deal:

• Who is the customer? A reliable, creditworthy buyer makes the deal more fundable.
• How firm is it? A signed contract or confirmed purchase order carries weight; a verbal yes, a quote or a letter of intent does not.
• What can go wrong before payment? Cancellation rights, performance conditions, defects periods and retention (money held back until the job is complete) all shape risk.
• Can you deliver? Funders want evidence you have done similar work, that supply is lined up and that the costings stand up.
• How will the money flow? Progress payments, milestone payments or a single invoice at the end change what’s needed and when.

Your general trading history still counts, but the contract is doing most of the heavy lifting.

How does a contract turn into funding?

The funding covers the cost of delivering the order: materials, subcontractors, labour, freight, customs. The funder is repaid from the customer’s payment, which is often directed through a controlled account or an arrangement that ensures the money goes through the funder first.

Stage	What is funded	What follows
Order confirmed	Materials and mobilisation	Production or site work begins
Work in progress	Labour and subcontractors	Milestone claims, if any
Delivered and invoiced	Nothing new; the invoice is now the asset	Move to invoice funding
Customer pays	Facility repaid, balance released to you	Cycle repeats on the next order

You’ll find the mechanics in more depth on the trade and purchase order finance page.

Illustrative example only. A joinery workshop receives a confirmed purchase order from a commercial fit-out company. It needs timber, hardware and extra labour for six weeks before it can invoice. Funding the cost of delivery lets the workshop accept the order instead of turning it down.

What do you need to hand over?

1. The signed contract or confirmed purchase order, in full.
2. Costings showing what delivery will cost and what margin remains.
3. Supplier quotes or purchase commitments that back those costings.
4. A delivery plan with timing, staffing and key risks.
5. Evidence of similar work completed, plus your usual business details, bank statements and ID.

If your documents are ready, tell us about the order and a specialist will say whether order funding or another route fits.

What are the trade-offs?

It only helps on specific deals. Order funding isn’t general working capital; each order is assessed separately.

Retention and milestones slow the cash. Money held back until completion still needs to be carried somewhere.

Disputes are the main risk. If the customer contests the work, the funder’s repayment is delayed, and so is yours. A clear scope in the contract protects both sides.

Payment direction. A funder may need customer payments paid to a controlled account, which requires the customer’s cooperation.

Cost. Because the funder takes delivery risk as well as payment risk, this route is generally priced above plain invoice funding.

business.gov.au has guidance on payment terms and invoicing that’s useful to review before you sign the contract, as clear terms reduce disputes later.

What makes one contract more fundable than another?

Funders read contracts for what can change the payment. Terms that help include a clear scope, a fixed price or a defined pricing method, set payment dates, and limited rights for the customer to cancel without paying for work done. Terms that worry include broad termination rights, open-ended variations, payment that depends on the customer’s own customer paying, and heavy penalties for delay.

You do not need to rewrite your contracts, but it helps to read them the way a funder will. If a clause could stop or reduce payment, be ready to explain it and show how you manage it. Where you still have the chance to negotiate, a clear payment schedule is worth more than a slightly higher price.

What happens if the job changes midway?

Jobs change. The scope grows, the customer adds a variation, a delivery slips. Funders know this, but they want to see that changes are agreed and documented, because an undocumented variation is a likely dispute. Keep a simple log of variations with dates and approvals. If the cost to deliver rises, tell your funder early, since a facility sized on the original costings may need adjusting, and early honesty keeps goodwill intact.

When is contract funding the wrong tool?

If the work is already finished and invoiced, you’ve moved past this stage; invoice funding is the match. If your orders are small and frequent, a line of credit may be simpler to run. If the contract is with an overseas buyer, Export Finance Australia explains government-backed support for exporters, including a small business export loan aimed at cash flow to fulfil export contracts and purchase orders, with its own eligibility conditions. And if the contract isn’t signed yet, hold off; no funder can lend against a maybe.

Can your contract put you on a workable route?

Possibly, if the customer is solid and the paperwork is firm. Enquiring takes about a minute, no credit check, and your details won’t be handed to a long list of lenders. A real person with experience in order and invoice funding reads your enquiry and calls you. Give us accurate numbers on the cost to deliver and the payment terms, and the match will be right first time. See if you qualify.