CAPITAL SPOTLIGHT: CONTRACT FUNDING
Capital Overview
This Featured Capital Spotlight highlights a contract-based funding relationship we use for construction and B2G businesses that self-perform their work and operate under progress or milestone billing structures.
Contract funding is designed for operators who have real contracts in hand, but whose cash flow lags the cost of execution. While revenue is earned over time through progress payments, the costs of labor, benefits, materials, and compliance often show up immediately. This capital steps in at the front end, allowing work to begin on schedule rather than waiting for the first pay application.
We bring this relationship into the conversation when contracts are awarded, schedules are set, and the challenge is execution timing, not winning the work.
When This Capital Makes Sense
In practice, this relationship makes sense when:
- Projects are paid through progress or milestone billings
- Payroll, benefits, materials, and startup costs must be covered before the first draw
- Work is performed by the company’s own W-2 employees
- Cash flow ramps as milestones are achieved rather than upfront
- Where This Capital Breaks
It tends to fall apart when:
- The contractor primarily acts as a pass-through GC
- Most of the scope is outsourced to subcontractors
- Progress billing is inconsistent, disputed, or poorly tracked
- The business lacks control over labor, scheduling, or job costs
- How This Capital Shows Up on a Project
This relationship is structured to:
- Provide capital once a contract is awarded
- Support payroll, materials, and early job costs
- Track repayment alongside progress or milestone billings
- Step down naturally as projects become self-funding
- How This Works with Bonded Jobs
On bonded work:
- The contract, scope, and performance obligations are clearly defined
- Progress and milestone billings are formalized and enforceable
- Capital can be aligned directly with execution rather than speculation
- How This Is Different from Factoring
- The funding account is established in the contractor’s own name and tied directly to the project. Customers and employees are not notified.
- Common Use Cases We See
Examples include:
- Self-performing contractors mobilizing on large commercial or public projects
- B2G businesses facing payroll-heavy scopes
- Operators scaling into larger contracts than their balance sheet would otherwise support
- How to Think About the Exit
- As milestones are achieved and progress payments are received, reliance on this capital naturally decreases.
- When This Capital Is (and Is Not) a Fit
- This capital is a strong fit for self-performing contractors and B2G businesses with awarded contracts.