Guide · Buying, expanding, opening
You signed a contract that needs three hires before the first invoice. What funds sixty days of new payroll?
By Alex Makowski Published
A working capital loan sized to the new hires' fully loaded cost for the gap between their start date and the contract's first payment — typically sixty to ninety days — funded in one to three business days on your existing deposits, with the signed contract attached. It is a dated gap with a named repayment source, which is the easiest kind of file to write. If every new contract starts this way, a line of credit is the shape for the pattern.
In this guide
- 01The gap, in real numbers
- 02Why it is an easy file
- 03Shrinking the gap before you fund it
- 04If this is every contract
- Won't affect your credit
- Free, no obligation
- Up to $500K
01
The gap, in real numbers
A services firm — an agency, a consultancy, a software shop, a staffing company — signs a contract that needs three people it does not yet have. They are hired in week one, paid from week two, and the first invoice goes out at the end of month one on net-30 or net-45 terms. By the time it is paid, the firm has funded two to three months of three salaries plus payroll tax, benefits and the equipment they sit at. For three people at $6,000 a month loaded, that is around $40,000 to $55,000 before the contract returns a dollar.
It is not a problem with the business. It is the shape of every services contract, and firms that grow fast hit it harder than firms that do not.
Application to funded
02
Why it is an easy file
A funder reads three things: your existing deposits, the signed contract with its payment schedule, and the offer letters. The first tells them what the business does today; the second tells them what repays the loan and when; the third tells them the money has a purpose with a date on it. A dated gap with a named repayment source is the easiest kind of working capital to underwrite, and firms with clean statements are offered it readily.
Decision in about a day, funding in one to three business days, amounts around half to one and a half times a month's deposits. Borrow the ramp — the loaded cost of the hires for the months until the first payment clears — and no more. Ask for weekly payments, and ask what early repayment saves, because the first invoice will clear the balance early.
03
Shrinking the gap before you fund it
A mobilization or onboarding fee in the contract, invoiced on signature, is normal in professional services and covers a real cost. Net-15 on the first invoice, even if the rest are net-30. Billing twice a month for the first quarter. Every one of those moves money forward and reduces what you borrow, and every one of them is easier to ask for before the contract is signed than after.
04
If this is every contract
A firm that wins a contract a quarter and hires ahead each time is running a permanent gap, sixty days wide, that grows with the business. A business line of credit sized to two months of payroll, drawn on hire and repaid on the first invoice, is the shape of a firm that stops applying for money every time it wins. Apply for it after this contract has paid and the statements show the new run rate.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Will a funder lend on a contract with a client they have never heard of?
- It lends on your deposits and reads the contract as the reason. A signed agreement with a payment schedule from any real client raises the offer. A verbal agreement or a proposal does not.
- Should I hire contractors instead of employees to avoid the gap?
- Contractors are paid on invoice rather than on payroll, which can move the cost closer to the client's payment. They cost more per hour and the classification rules are strict. It is a staffing decision, not a financing one; the gap exists either way.
- Can a firm under a year old get this?
- Six months of deposits is the usual floor. A young firm with one large contract and thin history will be offered less than the ramp needs; the contract's mobilization fee and a first-invoice net-15 are the levers that make the difference at that stage.
Guides
More on buying, expanding, opening
HVAC pre-season buy
Distributor terms first, working capital second, a line set up in August for next year.
Moving to a bigger space
Ask the landlord for the buildout money first. Fund the overlap and the closed week second.
Buying a competitor's assets
The equipment finances as equipment. The list is paid for with seller financing and deposits.
Scaling ad spend
Ad spend is the one cost that is not an asset and pays back in days. Match the money to that.
Adding snow to the business
The plow is equipment. The salt pile and the first push before contracts pay are not.
From booth rent to your own salon
Working capital needs six months of deposits you do not have yet. Equipment and the landlord do not.
Sources
- U.S. Small Business Administration — LoansFederal loan programmes, eligibility and what the SBA does and does not guarantee.
- U.S. Department of Labor — Fair Labor Standards ActThe federal law behind the rule that wages are due on the regular payday, whatever the cash position.
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Find out what you qualify for before you need it.
Eleven questions, about two minutes. You see offers side by side and take one, or none.
- Won't affect your credit
- Free, no obligation
- Decisions usually inside 24 hours
- Up to $500K