Winning another contract or a larger run of agricultural work can be exactly what a business has been chasing.
Then the first payroll arrives.
The fuel account grows.
Another subcontractor needs paying.
Machinery is running longer hours.
And the customer has not paid the first invoice yet.
Around Gunnedah and the Liverpool Plains, agriculture includes grain, cotton, cattle and the businesses that support those industries. That creates opportunities for contractors, transport operators and agricultural service businesses as seasonal activity increases.
The finance problem can start when the business has enough work but not enough cash to carry the first few weeks of it.
A $300,000 Contract Does Not Put $300,000 in the Bank Today
Contract value and available cash are very different things.
Imagine a contractor secures $300,000 of additional work.
That sounds substantial.
But before the first customer payment arrives, the business might need:
$35,000 for wages
$30,000 for diesel
$15,000 for subcontractors
$10,000 for repairs and servicing
$8,000 for accommodation and travel
$7,000 for other operating expenses
The business may need more than $100,000 before the first significant payment comes back.
That is the part of growth that can catch businesses out.
The work may be profitable.
The customer may be strong.
The contract may be valuable.
But the business still has to fund the gap between starting the work and getting paid for it.
With around 30 years in finance, Thrive Broking looks at that timing before simply asking how much the business wants to borrow.
When Can You Actually Invoice?
This is one of the first questions worth answering.
Can the business invoice weekly?
Fortnightly?
At the completion of each stage?
At the end of the month?
Only once the entire job is completed?
Those terms can completely change the amount of working capital required.
A business invoicing every Friday may have a very different cashflow requirement from one doing exactly the same amount of work but only invoicing at the end of the month.
Then there is the customer’s payment term.
If an invoice is issued on 31 October and the customer pays 30 days later, the business may have already funded weeks of work before the payment clock even starts.
That is why we want the whole timeline.
When does the work start?
When can you invoice?
When is the customer expected to pay?
What expenses happen in between?
Won the Work Already? Show Us What It Costs to Deliver
If you already have additional work starting around Gunnedah, tell Thrive Broking about the job before the increased expenses hit the bank account.
Send us:
The approximate contract or job value
When the work starts
How long it is expected to run
When you can invoice
Customer payment terms
Expected weekly wages
Fuel and subcontractor costs
Other major operating expenses
Existing business finance commitments
The amount of cash already available
We can then look at whether
working capital finance may be relevant to the period before the new revenue starts reaching the business.
The aim is not to borrow against the full contract value.
It is to identify the amount the business genuinely needs to mobilise and carry the work.
Growth Can Use Cash Faster Than a Quiet Business
A business that is not very busy may have fewer immediate expenses.
A business that suddenly becomes extremely busy can burn through cash quickly.
More kilometres mean more diesel.
More jobs mean more labour.
More equipment hours can mean more servicing and repairs.
More employees may mean higher payroll and superannuation commitments.
More revenue can also mean a larger GST and tax obligation later.
That is why increasing turnover does not automatically improve short term cashflow.
Sometimes it does the opposite.
The business has to spend first.
The customer pays later.
If that pattern is understood before the work starts, the funding requirement can be planned rather than dealt with after the account becomes tight.
Do Not Assume the Customer’s Purchase Order Solves the Finance Problem
A confirmed contract, work order or purchase order can be useful information.
It shows why the business needs additional capacity.
But it does not mean every lender will simply advance the money required to complete the work.
The lender will still consider the business itself.
Depending on the finance and lender, that may include:
Trading history
Turnover
Existing commitments
Credit profile
Bank statement conduct
Existing business debt
The amount requested
The purpose of the funds
The expected repayment pathway
The quality of the underlying business activity
A strong new contract can help explain the funding requirement.
It does not replace normal lender assessment.
That is another reason to speak with Thrive Broking before committing to expenses based solely on the value of the work you have won.
What Happens Once the First Invoices Are Raised?
The finance requirement can change once work has been completed and invoices have been issued.
Before invoicing, the business may need working capital to deliver the contract.
After invoicing, the money may be sitting in the debtor ledger waiting for the customer to pay.
If there are suitable commercial invoices,
debtor and invoice finance may become relevant.
That creates two different stages.
Stage one is:
“We need cash to do the work.”
Stage two is:
“We have done the work and customers now owe us the money.”
The same business can move from one problem to the other over a matter of weeks.
Understanding that cycle can help avoid repeatedly taking unrelated short term loans every time cash becomes tight.
An Extra Truck or Machine Can Make the Funding Requirement Bigger
Winning more work may also mean the business needs another asset.
Perhaps another truck is required.
A trailer.
A loader.
An excavator.
A tractor.
Another ute.
Now the business has two finance requirements.
One is buying the asset.
The other is funding the operating costs created by using it.
Suppose a transport business buys another prime mover to handle additional agricultural freight.
The truck may be financed separately.
But the business still needs to pay:
Registration
Insurance
Fuel
Driver wages
Repairs
Tyres
Servicing
Those costs begin immediately.
The customer payment may not.
This is why financing the asset alone may not solve the whole growth requirement.
If another machine or vehicle is part of the new work, tell us at the beginning.
We want to understand how much the business needs to buy the capacity and how much it needs to operate that capacity.
Existing Debt Can Reduce the Benefit of Winning More Work
Another consideration is what the business is already paying.
There may be:
Truck finance
Equipment finance
An overdraft
A credit card
A short term business loan
ATO repayments
Other working capital facilities
If a business is already losing $25,000 or $30,000 a month to existing finance commitments, another large contract may not improve cashflow as quickly as expected.
Part of the additional revenue may immediately disappear into old repayments.
That does not necessarily mean the new work should be declined.
It means the existing debt needs to be included in the cashflow calculation.
When Thrive Broking reviews a contract mobilisation or working capital request, we want to understand the commitments already sitting underneath the business.
Otherwise, the required funding amount can be underestimated.
Customer Concentration Matters Too
A large contract can transform a business.
It can also make the business much more dependent on one customer.
Suppose the new customer will represent 55 per cent of total turnover.
That can create substantial growth.
But it also means one customer’s payment cycle now has a major influence on cashflow.
If they pay seven days later than expected, can the business still cover payroll?
If one invoice is queried, what happens?
If the next month’s work starts before the previous month has been paid, how much cash is needed?
These are questions worth considering before scaling expenditure around one account.
A big customer is not automatically a problem.
But the business should understand how much working cash is required to carry that customer.
Do Not Finance a $300,000 Contract With a $300,000 Loan Just Because You Can
The funding amount should be based on the gap.
If the business needs $90,000 to mobilise the job and customer receipts begin before the next major expenditure cycle, borrowing substantially more may not be necessary.
Likewise, borrowing too little can leave the business arranging another facility several weeks later.
That is why a basic cashflow forecast can be useful.
It does not have to be complicated.
Week 1:
What goes out?
What comes in?
Week 2:
What goes out?
What comes in?
Continue until customer payments begin catching up with expenditure.
That gives us a much more useful picture of the peak funding requirement.
The facility can then be considered around the business’s actual need rather than an arbitrary round figure.
Gunnedah Has the Agricultural Activity to Support Growing Service Businesses
Gunnedah Shire Council describes agriculture as a pillar of its economy, driven by beef cattle and sheep, grains and cotton, while the area also supports agribusiness and agricultural engineering services.
That creates genuine opportunities for businesses servicing agricultural production.
But winning more work and funding more work are two separate things.
The stronger the growth, the more important it becomes to understand the cash required before the revenue catches up.
Tell Us About the Work Before You Start Funding It Yourself
If your transport, contracting or agricultural service business around Gunnedah has secured more work, a larger customer or a new contract, talk to Thrive Broking before the extra workload starts draining the cash already in the business.
Tell us what the work is worth.
Tell us when it starts.
Show us when you can invoice and when the customer pays.
Then show us what you need to spend before that first payment arrives.
With around 30 years of finance experience, Thrive Broking can look at whether working capital, debtor finance once invoices are raised, or another business finance structure may fit the requirement.
Winning the work is the first step.
Making sure the business has enough cash to deliver it is the next one.