How to fund a big contract

Landing a big contract can change a business. A council tender, a supply deal with a national retailer, a subdivision's civil works or a manufacturing order twice the size of anything you've done before can lift revenue, reputation and future work in one hit. It can also stretch your cash further than it's ever gone.

The reason is simple: you pay first and get paid later. Staff, materials, equipment and subcontractors are due within weeks, while the customer pays on its own terms, often months later. This guide shows you how to map that cash gap, shrink it through smart negotiation and fund what's left without putting the rest of the business at risk. We'll also explain how fundU funds big contracts with loans secured on property, where the contract payments often become the exit.

Why does a big contract create a cash flow problem?

Because costs arrive before revenue, and the bigger the contract, the bigger the gap. A contract that doubles your turnover can also double your working capital needs almost overnight.

The typical pattern looks like this:

• Mobilisation. Recruitment, training, site set-up, tooling and extra insurance before any work is billed.
• Materials and stock. Large orders often need paying on supplier terms that are shorter than your customer's.
• Wages. New staff are paid every week or fortnight from day one.
• Payment terms. Big customers commonly pay on 30, 45 or 60-day terms, sometimes longer.
• Retentions and approvals. Some contracts hold back part of each payment or require sign-off before an invoice can be paid.

The profit is real, but it arrives at the end. The business has to survive the middle.

How do you map the cash gap on a big contract?

Build a week-by-week cash flow for the contract alone, separate from the rest of the business. It shows exactly how much cash you need and when.

1. List every cost. Include labour, materials, equipment, subcontractors, transport, insurance, extra premises and overheads the contract adds.
2. Put each cost in the week it will actually be paid. Supplier terms, payroll dates and deposits all matter.
3. List every customer payment. Include deposits, milestone payments and progress claims.
4. Put each payment in the week you'll actually receive it. Apply the customer's payment terms, and allow for approval delays and any retentions.
5. Calculate the weekly net and run the balance forward. Start from zero, because this is the contract's own cash flow.
6. Find the lowest point. That's the maximum funding the contract needs.
7. Add a buffer. Allow for a delayed start, a late payment or a cost overrun. Contracts rarely run exactly to plan.
8. Test it against your existing business. Make sure the rest of the business can still pay its own bills while the contract ramps up.

Wage costs are one of the easiest things to underestimate. The minimum wage rose to $23.95 an hour from 1 April 2026, and the default KiwiSaver contribution rate rose to 3.5% from the same date. Price in the full cost of each new employee, not just the hourly rate.

How can you negotiate the contract to need less funding?

The cheapest funding is the funding you don't need. Before you sign, you have more leverage than you will at any other point, so use it.

• Ask for a deposit or mobilisation payment. Many customers will pay something up front for large custom orders or major works.
• Break payment into milestones. Monthly progress payments or stage payments are far easier to fund than one payment at the end.
• Shorten the payment terms. Even moving from 60 to 30 days can halve the funding you need.
• Negotiate retention terms. Ask for a lower percentage, a cap or earlier release.
• Get supplier support. Tell key suppliers about the contract and ask for extended terms or staged deliveries.
• Clarify variations. Agree in writing how extra work will be priced and paid before it happens.

If the contract is in construction, the Construction Contracts Act 2002 sets rules for payment claims, payment schedules and retentions. Our guide on construction retentions and payment claims explains how to use them.

What are the options for funding a big contract?

Most businesses use a combination. The right mix depends on how big the gap is, how long it lasts and what assets you have.

Funding option	Best for	Things to weigh up
Existing cash reserves	Smaller gaps	Leaves the rest of the business with less buffer
Bank overdraft or increased limit	Established businesses with a strong bank relationship	Approval can take time; limits may not stretch far enough
Supplier credit	Materials-heavy contracts	Depends on supplier appetite; only covers their goods
Equipment finance	New machinery or vehicles	Secured on the asset; doesn't cover wages or materials
Invoice finance	Contracts with creditworthy customers and regular invoicing	Only available once invoices are issued
Property-secured business loan	Larger gaps, mobilisation costs, or when the bank is slow or says no	Needs property security and a clear exit

The RBNZ's May 2026 Financial Stability Report notes that smaller firms rely on bank and non-bank lending and more often face tougher terms. In practice, that means many growing businesses find the bank slow to respond to a sudden contract win, even when the business is strong. A private lender that decides for itself can fill that gap.

How does a property-secured loan fund a contract?

A property-secured loan uses equity in New Zealand real estate to provide a lump sum that can cover any contract cost: wages, materials, equipment, subcontractors or mobilisation. Because the lender relies on the property, the funding doesn't depend on the contract being fully signed off or invoices being approved.

With fundU:

• Loans are $20,000 to $1m for business purposes, secured by a first or second mortgage over residential, commercial or industrial property.
• The security can be yours, your company's, your family trust's or a supporting party's, such as a family member acting as guarantor.
• Repayment options can suit the contract. Depending on the approved terms, interest-only or capitalised interest, with no scheduled monthly repayments during the term, can let the contract run before repayment.
• The exit is often the contract itself. The loan can be repaid from contract payments, followed by a refinance or improved cash flow.

Our business expansion finance page explains how we fund growth, and our equipment finance page covers property-backed funding for plant and vehicles.

Can Investment Boost help with equipment for a contract?

It can reduce the tax cost of new equipment. Investment Boost gives a 20% upfront deduction on the cost of eligible new assets, and assets new to New Zealand, acquired from 22 May 2025. Second-hand New Zealand assets and residential buildings are excluded.

That's a tax deduction, not a grant, so it helps your tax position after you buy rather than paying for the equipment at the start. You still need to fund the purchase. If a contract needs a new excavator, CNC machine or delivery truck, talk to your accountant about how Investment Boost applies, then plan the funding. Our guide on Investment Boost and equipment funding goes into more detail.

What risks should you plan for before you sign?

Big contracts bring big upside and concentrated risk. Planning for the likely problems up front is what separates growth from overreach.

• Customer concentration. If one customer becomes most of your revenue, their payment habits become your cash flow. Keep existing customers looked after.
• Late payment. Budget for the customer paying later than the contract says. Our guide on late-paying customers covers how to chase firmly.
• Cost overruns. Materials prices and labour availability can change over the life of a contract.
• Delays. A late start pushes revenue back but not always costs.
• Capacity. Make sure your team and systems can deliver without neglecting other work.
• The exit. Know exactly which payments will repay any funding, and what happens if they arrive late.

A clear exit plan is essential for any short-term funding. Our guide to exit strategies for short-term business loans explains the common options.

What should you have ready when you ask for contract funding?

The faster a lender can understand the contract, the faster it can decide. You don't need a full set of financial statements to start a conversation with fundU, but a tidy pack of information makes everything easier.

Have these ready:

• The contract or letter of award. Or the tender and the customer's written confirmation if the contract is still being finalised.
• Your contract cash flow. The week-by-week forecast showing the gap and when it closes.
• Payment terms. Deposit, milestones, progress claim dates, payment terms and any retentions.
• The funding amount and purpose. What the money will pay for: wages, materials, equipment, mobilisation.
• Property details. The address, the owner (you, your company, your family trust or a supporting party) and any existing mortgage.
• Recent bank statements. They show how the business trades today.
• Your exit. Which payments will repay the loan, and your fallback if they're late.

A one-page summary covering the contract, the gap and the exit is often all a credit team needs to give you an early indication. The rest can follow while you get on with preparing to deliver.

Example scenario

A timber processing and joinery manufacturer in the Bay of Plenty won a contract to supply components for a large commercial housing development. The contract was worth several times the business's usual monthly turnover, with payment on 45-day terms after each monthly delivery. The owner needed to hire six staff, buy a large timber order up front and add a second shift.

The week-by-week cash flow showed a funding gap of around $320,000 at its lowest point, about four months in. The owner negotiated a mobilisation payment that covered part of the first timber order, which reduced the gap. fundU then provided a $250,000 first mortgage over the company's unencumbered industrial unit, worth about $1.2 million. The loan was structured with capitalised interest, and the exit was repayment from contract payments over the following months, with a bank refinance as a fallback. This is an illustrative example, not a real customer.

Key takeaways

• A big contract creates a cash gap because costs arrive weeks or months before customer payments.
• Map the gap with a week-by-week contract cash flow, and add a buffer for delays.
• Negotiate deposits, milestones, shorter terms and lower retentions before you sign.
• Price in the full cost of new staff, including the 2026 minimum wage and KiwiSaver changes.
• Use the right mix of funding: supplier credit, equipment finance and a property-secured loan can work together.
• Make sure the contract payments give you a clear exit for any short-term funding.

Don't let a cash gap cost you the contract

If you've won or are about to win a big contract and need funding to deliver it, talk to us early. fundU is a direct private lender offering $20,000 to $1m secured on New Zealand property, and our own team makes the decisions. Find out more about our short-term business loans, then see if you qualify. It takes a couple of minutes, doesn't affect your credit score, and a lending specialist will call you back. Or call us on 09 875 4577.