Winning a large new customer should be good news.
But for many B2B companies, a major contract creates an immediate cash flow problem.
You may need to hire employees, cover payroll, purchase materials, pay subcontractors, buy fuel, increase production, or expand operations today. Meanwhile, your new customer may not pay your invoices for 30, 60, or even 90 days.
That creates a simple but potentially serious problem:
You have the revenue, but you do not have the cash yet.
For businesses that invoice creditworthy commercial or government customers, invoice factoring can help bridge that gap by converting qualifying unpaid invoices into working capital instead of forcing the business to wait for the customer’s normal payment cycle.
Quick Answer: How Can You Fund a Large Contract With Net 30, 60, or 90 Payment Terms?
If you have already delivered the product or performed the service and issued an invoice, invoice factoring can provide working capital against that receivable.
Instead of waiting 30 to 90 days for your customer to pay, you sell the qualifying invoice to a factoring company and receive an advance on its value. Once the customer pays, the remaining balance is released minus the factoring company’s agreed fees.
This can give your business the cash needed to fund payroll, materials, fuel, suppliers, subcontractors, and the next stage of the contract.
However, if you need money before any work has been completed or an invoice has been created, invoice factoring may not cover that initial expense. A line of credit, purchase-order financing, vendor terms, customer deposit, or another working-capital solution may be more appropriate for the pre-invoice stage.
Why Can a Large New Contract Create a Cash Flow Problem?
A signed contract does not necessarily mean immediate cash.
Many B2B and government customers purchase goods and services using payment terms such as:
- Net 30
- Net 45
- Net 60
- Net 90
Under Net 60 terms, for example, an invoice generally becomes due 60 days after the applicable invoice date under the customer’s agreed payment terms.
Your expenses usually do not wait that long.
A staffing company may need to make payroll every week. A trucking company needs fuel for the next load. A manufacturer needs raw materials. A contractor may need labor and supplies. A janitorial or security company may need to staff a new location immediately.
That creates a working-capital gap between completing the work and receiving payment.
The larger the contract becomes, the larger that gap can become.
The Cash Flow Problem Behind Rapid Growth
Imagine your company normally bills $100,000 per month.
You land a new customer that increases monthly billings to $200,000.
That sounds like a major success—and it is.
But assume the new customer pays on Net 60 terms.
Your business may have to support nearly two months of additional expenses before it begins receiving the corresponding customer payments. Depending on your industry, those expenses could include:
- Employee payroll
- Payroll taxes
- Inventory
- Raw materials
- Fuel
- Equipment
- Insurance
- Subcontractors
- Shipping
- Recruiting
- Supplies
- Additional overhead
This is why a business can be profitable on paper and still struggle to maintain enough cash in the bank.
Growth consumes working capital before it produces cash.
How Does Invoice Factoring Help Fund a New Contract?
Invoice factoring converts accounts receivable into faster access to working capital.
The basic process works like this:
- Your company completes the work.
You deliver the goods or perform the service required under your contract. - You invoice your customer.
The customer may have Net 30, Net 60, Net 90, or other agreed payment terms. - You submit the qualifying invoice for factoring.
The factoring company reviews and verifies the receivable. - You receive an advance.
Instead of waiting for the customer to pay, you receive an agreed percentage of the invoice value. - Your customer pays according to its normal terms.
Payment is directed to the factoring company. - You receive the remaining balance.
After collection, the factor releases the remaining reserve, minus applicable factoring fees.
EZ Invoice Factoring states that qualifying invoices can receive advances of up to 95% in some circumstances and that funding on approved invoices is typically available quickly after account setup. Actual advance rates, timing, fees, and eligibility vary by transaction and factoring provider.
Can Invoice Factoring Fund the Contract Before You Start the Work?
Usually, invoice factoring requires an eligible accounts receivable to exist.
That means you generally must first provide the goods or services and create an invoice before that invoice can be factored.
This distinction matters.
If you win a $500,000 purchase order tomorrow but need $200,000 today to buy the inventory required to fulfill it, there may not yet be an invoice available to factor.
In that situation, you may need to consider alternatives such as:
- Negotiating a customer deposit
- Requesting milestone or progress payments
- Extending payment terms with suppliers
- Using an existing business line of credit
- Exploring purchase-order financing when appropriate
- Using equipment financing for equipment purchases
- Combining available cash with financing until the first invoice is generated
Once eligible invoices begin being issued, factoring may then provide an ongoing source of working capital for later stages of the contract.
This makes planning before signing or starting a large contract especially important.
Why Factoring Can Be Useful for Recurring Contracts
Invoice factoring becomes particularly useful when a large contract generates invoices on a recurring basis.
Consider a staffing company that invoices a customer every week.
Employees must still be paid weekly, while the customer may pay 30 or 60 days later.
Once invoices are generated and approved for factoring, the staffing company can continuously convert those receivables into working capital.
The cycle can look like this:
Work → Invoice → Factor → Receive cash → Cover expenses → Complete more work → Invoice again
Instead of allowing accounts receivable to grow while available cash shrinks, the company can continually unlock cash tied up in eligible invoices.
This structure can be valuable for businesses experiencing sustained growth.
Which Industries Commonly Face Contract-Funding Gaps?
Any B2B company that incurs expenses before receiving payment can experience a working-capital shortage.
The problem is particularly common in industries with high operating expenses or extended customer payment terms.
Staffing Agencies
Staffing firms may pay employees weekly while commercial clients pay invoices 30 to 60 days later.
A new contract requiring dozens of additional workers can therefore increase payroll before customer payments catch up.
Trucking and Transportation
Carriers need cash for fuel, drivers, maintenance, insurance, and other operating expenses.
Waiting weeks for brokers or shippers to pay can restrict the number of loads a carrier can accept.
Construction
Contractors and subcontractors often face labor, material, supplier, and subcontractor expenses before receiving payment for completed work.
Construction receivables can also involve more complicated billing and verification requirements, so not every invoice will qualify for traditional factoring.
Manufacturing
Manufacturers may purchase materials, run production, pay employees, package products, and arrange shipping before receiving payment from commercial customers.
A large order can therefore consume significant cash before the resulting receivable is collected.
Government Contractors
A government contract can create significant revenue opportunities while still requiring contractors to fund labor, supplies, equipment, and other costs during the payment cycle.
Factoring qualifying government receivables can help convert completed and invoiced work into working capital.
Janitorial and Security Companies
New service contracts frequently require immediate hiring, uniforms, equipment, supplies, training, and payroll.
When the customer pays well after those expenses occur, receivable factoring can help close the gap.
Why Not Just Use a Bank Loan or Line of Credit?
A traditional bank loan or business line of credit can be an excellent solution for companies that qualify and have sufficient borrowing capacity.
But it is not always the right tool for rapid contract growth.
Traditional financing may be limited by:
- Available collateral
- Business credit
- Financial history
- Existing debt
- Loan covenants
- Borrowing limits
- Approval timelines
Invoice factoring is structured differently because the transaction centers on accounts receivable and the ability of the customer to pay the invoice.
Factoring is generally a sale of receivables rather than a traditional term loan. Factoring companies therefore place significant emphasis on the quality and creditworthiness of the customers responsible for paying the invoices.
For a company with strong B2B customers but limited available working capital, that difference can be important.
Is Factoring Worth the Cost of Taking a Large Contract?
The right question is not simply:
“How much does factoring cost?”
A better question is:
“What does access to this cash allow the business to accomplish?”
Suppose factoring allows your company to accept a profitable contract that otherwise would have to be declined.
The analysis should consider both the factoring cost and the economic value created by having the working capital available.
Consider questions such as:
- What is the gross profit expected from the contract?
- How quickly does the customer typically pay?
- How much of each invoice needs to be factored?
- What is the total factoring fee under the proposed agreement?
- Will funding help the company generate additional profitable revenue?
- Could improved cash flow produce better supplier terms or discounts?
- Are there additional transaction, minimum, wire, or administrative fees?
- What happens if the customer pays late?
- Is the arrangement recourse or non-recourse?
Factoring fees and advance structures vary based on factors such as invoice volume, customer creditworthiness, payment timing, industry, and the type of factoring arrangement. Businesses should evaluate the full fee structure instead of comparing offers based only on the advertised rate.
Internal link: The True Cost of Invoice Factoring: Fees, Rates and What to Expect
When Should You Arrange Factoring for a New Contract?
Do not wait until the day payroll is due to begin thinking about working capital.
Ideally, review your funding needs before the new contract significantly increases expenses.
Ask:
- How much cash will we spend before the first invoice is generated?
- When will we be permitted to invoice?
- What documentation will the customer require before approving invoices?
- What are the customer’s actual payment terms?
- How much cash will be tied up in accounts receivable at peak volume?
- Are the invoices likely to qualify for factoring?
- Does another lender already have a lien on our accounts receivable?
- How much funding will we need each week or month?
This creates a clearer picture of the contract’s working-capital requirements.
It also helps distinguish the pre-invoice funding gap from the post-invoice payment gap.
Invoice factoring is designed primarily to address the second one.
What Should You Look for in a Factoring Company?
Large contracts can increase both your revenue and your financial exposure, so choosing the right factoring arrangement matters.
Compare potential factoring partners based on more than the headline rate.
Look at:
- Advance rate
- Factoring fee
- Funding speed
- Contract length
- Monthly minimums
- Termination provisions
- Recourse requirements
- Customer concentration limits
- Industry experience
- Invoice verification procedures
- Customer service
- Collection practices
- Additional fees
- Funding limits
You should also determine whether the factoring company understands your industry’s billing practices.
Construction invoices, staffing invoices, freight bills, manufacturing receivables, and government invoices can each involve different documentation and verification requirements.
Signs Factoring May Be a Good Fit for Your New Contract
Invoice factoring may be worth considering when:
- You sell to other businesses or government entities
- Your customers have established credit
- Customers pay on Net 30, Net 60, Net 90, or similar terms
- You have valid invoices for completed work or delivered goods
- A new contract is causing receivables to grow quickly
- Payroll or supplier costs occur before customer payments arrive
- You need additional working capital as sales increase
- Traditional financing does not provide enough flexibility
- You want funding capacity that can grow with eligible receivables
Factoring will not be the right solution for every company or every contract, but it can be especially useful when the primary problem is money trapped in accounts receivable.
Frequently Asked Questions About Funding Large Contracts
How do I finance a large contract when the customer pays Net 60?
Once work has been completed and an eligible invoice has been issued, invoice factoring can convert that Net 60 receivable into faster working capital. If you need money before the invoice exists, you may need a separate pre-invoice financing solution.
Can I factor invoices from a new customer?
Potentially. Factoring companies generally review the creditworthiness of the customer responsible for paying the invoice along with the invoice, contract, and other relevant documentation.
Can invoice factoring help me make payroll?
Yes. Businesses commonly use factoring proceeds as working capital for expenses such as payroll. This can be particularly useful for staffing and other labor-intensive companies where employees must be paid before customers settle invoices. EZ Invoice Factoring specifically identifies payroll and other operating expenses as potential uses of factoring proceeds.
Can I use factoring for a contract that has not started yet?
Not usually if no eligible invoice exists yet. Invoice factoring is based on accounts receivable. You generally need to complete the applicable work or deliver the goods and generate an eligible invoice before it can be factored.
Does invoice factoring create a loan payment?
Invoice factoring is generally structured as the purchase of accounts receivable rather than a traditional business loan. The customer pays the factored invoice, and the factor settles the transaction according to the factoring agreement.
How quickly can a business receive factoring funds?
Timing depends on application review, documentation, invoice verification, liens, customer credit, and the factoring company. EZ Invoice Factoring states that its application process can be completed quickly and that approved, verified invoices may be funded as soon as the same day in some situations.
Can factoring grow as my contract grows?
Potentially. Because funding is tied to eligible receivables, a company generating more qualifying invoices may be able to access more factoring capacity, subject to customer credit limits, concentration limits, contract terms, and factor approval.
Turn Your New Contract Into an Opportunity—not a Cash Flow Problem
Winning a major contract should help your company grow.
It should not force you to choose between making payroll, paying suppliers, and accepting the next opportunity.
When customers pay on Net 30, Net 60, or Net 90 terms, the real challenge may not be profitability. It may simply be timing.
Invoice factoring can help qualified B2B companies turn unpaid receivables into working capital so they can keep employees paid, suppliers moving, and contracts on schedule without waiting weeks or months for customer payments.
At EZ Invoice Factoring, we help businesses explore factoring solutions based on their industry, customers, invoices, and cash flow needs.
Have a large new contract and need to know whether your invoices can be factored? Get a free factoring quote from EZ Invoice Factoring and find out what funding options may be available to your business.
Internal link: Get a Free Quote / Contact EZ Invoice Factoring
