How Can Small Businesses Fund a New Contract Before Getting Paid?

Underwriting review: Fundo Underwriting Team
Last updated: October 2026

Small businesses can fund a new contract through customer deposits, milestone payments, supplier credit, contract-specific financing, or funding based on existing business revenue. The right option depends on when expenses are due and when customer payments will arrive. Fundo offers Revenue-Based Financing for business purposes, evaluating an operating business’s financial activity rather than treating a newly signed contract as automatic approval.

You landed the job. Now you need to pay the people, purchase the materials, or reserve the equipment that makes it possible.

The customer’s payment terms might say 30 days. Your supplier might need payment tomorrow.

Before choosing contract financing, separate three numbers: what the customer will pay, what completing the work will cost, and how much cash must leave your account before the customer’s money arrives.

That last number is where your funding plan begins.

What funding options can cover expenses before a customer pays?

Match the funding to the stage of the job. A signed agreement, a confirmed goods order, and an unpaid invoice represent different situations.

Your situation	Option to evaluate	What to check first
The customer has signed, but work has not started	Deposit or milestone payments	Whether the customer will pay before major expenses come due
Materials are the main upfront expense	Supplier credit	Whether the supplier’s due date matches your customer’s payment timing
You need financing tied to a particular project	Contract-specific financing	Eligible costs, documentation, funding controls, and timing
You have a confirmed order for physical goods	Purchase order financing	Whether the order, supplier, and customer qualify
You completed work and issued an eligible invoice	Invoice factoring	Fees, customer notification, and responsibility for unpaid invoices
Your business already generates revenue	Revenue-Based Financing, an MCA, or an available business credit line	Total cost and the effect of payments or remittances on operating cash

These are options across the market. Fundo’s offering discussed here is Revenue-Based Financing; this comparison does not mean Fundo provides every product listed.

What is contract financing?

Contract financing is funding used to cover the costs of fulfilling a customer contract before the related payment arrives. It can help address expenses such as labor, materials, equipment rental, and supplies.

The term is used broadly. A financing arrangement tied to one specific contract differs from working capital evaluated against your business’s overall revenue and financial activity.

That distinction affects what you need to qualify.

With project-specific financing, the agreement and the customer’s ability to pay can be central to the review. With revenue-based funding, the operating business’s financial history matters.

A promising new contract can explain why you need money. It does not necessarily establish how much funding your business can receive.

Can Fundo help a business cover a new contract’s expenses?

An eligible operating business may apply for Fundo’s Revenue-Based Financing for business expenses associated with new work. Approval and the amount offered depend on underwriting.

Fundo serves eligible small business owners, sole proprietors, freelancers, independent contractors, 1099 workers, and gig workers. Its Revenue-Based Financing eligibility guide sets out these starting criteria:

Fundo eligibility or feature	Current published information
Average monthly business revenue	At least $1,500
Time in business	At least three months
Account activity	Consistent activity
Published funding range	$500–$10,000, subject to approval
Personal checking account	May be accepted in qualifying situations
Business structure	Eligible sole proprietors may apply without forming an LLC
Minimum FICO score	No stated minimum
Use of funds	Business purposes only

Meeting the starting criteria does not guarantee approval.

For example, a business with an $18,000 customer contract might need only $5,000 to begin work. That need falls within Fundo’s published funding range, but the business must still qualify for the amount offered.

A larger contract does not automatically produce a larger offer. Fundo explains how it reviews monthly business revenue, including why deposits, cash flow, and existing obligations matter alongside the revenue total.

How much contract funding do you actually need?

Your funding need is the largest projected cash shortfall during the job, including a reasonable cushion. Calculating only the first material purchase can leave you short when payroll or another supplier bill arrives.

Build the forecast around payment dates:

1. List project expenses and when each must be paid.
2. Add existing business obligations due during the same period.
3. Identify customer payments and other cash expected to arrive.
4. Reserve money already committed to taxes, payroll, or essential bills.
5. Find the point where available cash falls furthest below what you need.

Once you have a financing offer, add its fees and payment or remittance schedule to the forecast.

Example: an $18,000 contract with a $5,000 initial gap

This hypothetical example illustrates cash planning. It is not a Fundo customer result, approval, or offer.

A commercial cleaning business wins an $18,000 project. The customer pays a $3,000 deposit, with a milestone payment and final payment scheduled later.

Before the milestone payment, the owner expects:

Initial project cash calculation	Amount
Supplies and equipment rental	$3,200
Labor	$4,800
Transportation and other project expenses	$1,000
Total expenses before the milestone payment	$9,000
Planned cash cushion	$1,000
Customer deposit already received	−$3,000
Available business cash after existing commitments	−$2,000
Initial funding gap	$5,000

The calculation is $9,000 + $1,000 − $3,000 − $2,000 = $5,000.

The owner still needs to forecast the rest of the job. Later expenses or financing-related outflows could create a larger gap.

Now move the milestone payment two weeks later. Would another payroll become due? Would equipment rental continue? Could regular customer receipts cover the difference?

That second forecast helps answer a more useful question than “Can I start?” It asks whether the business can finish without leaving other bills unpaid.

Can you reduce the gap before applying for financing?

Negotiate a deposit tied to startup costs

A deposit can help cover materials, scheduled labor, or other costs incurred before the customer receives the finished work.

Explain what the deposit supports. For example: “The initial payment allows us to order the project materials and reserve the installation dates.”

Set the amount and terms in the written agreement. Avoid committing to nonreturnable purchases before the agreed payment arrives.

Break a long project into billable milestones

Milestone billing creates payment points during the work.

Define the deliverable, who approves it, when you can invoice, and when payment becomes due. “Payment after phase one” can leave too much open to interpretation.

Also confirm what starts the payment clock. Thirty days after invoice approval can mean a longer wait than thirty days after submitting the invoice.

Ask suppliers about payment terms

Supplier credit can reduce the amount needed for materials upfront. It usually does not solve unrelated expenses such as payroll or transportation.

Compare the supplier’s due date with the customer’s expected payment date. If materials are payable on day 30 and the customer pays on day 60, you still need to cover the difference.

Include fees and any early-payment discount you would give up when comparing the cost.

How do the main financing options differ?

Contract-specific financing

Contract-specific financing is structured around performing a particular agreement. It can be worth investigating when project costs are substantial and customer payments arrive in stages.

Ask which expenses qualify, what documentation is required, and how funds are released. Confirm whether the financing arrangement controls payments to suppliers or the collection of customer receipts.

The operational details matter. An offer that arrives after your required start date cannot solve the immediate problem.

Purchase order financing

Purchase order financing generally addresses confirmed orders for physical goods. A typical arrangement funds supplier costs so the business can fulfill the customer’s order.

A distributor purchasing products for resale has a different need from a consultant hiring help for a service engagement. Do not assume purchase order financing fits both.

Confirm who receives the funds and what happens if goods are delayed, rejected, or returned.

Invoice factoring

Invoice factoring involves selling eligible unpaid receivables to obtain cash sooner.

A newly signed contract is not the same as an invoice for completed work. If the new job has not begun, there may be no eligible receivable from that job to factor.

However, invoices from other completed projects could be relevant. Review the fees, notification arrangements, and who bears the risk of nonpayment or a customer dispute.

A business line of credit

An available business line of credit can provide access to funds up to an approved limit, subject to its terms.

For recurring project gaps, compare the cost of each draw, required payments, and available borrowing capacity. Include existing balances in your forecast.

If you do not already have a line, confirm the application timeline before making commitments that depend on receiving funds.

Revenue-Based Financing and merchant cash advances

Revenue-Based Financing and merchant cash advances can address working-capital needs associated with an operating business’s revenue or future receivables.

The label alone does not explain the full agreement. Compare the amount received, total cost, remittance frequency, and any reconciliation or adjustment provisions.

Fundo’s comparison of funding options for self-employed business owners provides additional context for businesses with uneven income.

For this contract decision, ask: Can the business support the funding terms while the new customer has yet to pay?

What does Fundo review beyond the signed contract?

Fundo’s published underwriting process considers business revenue, deposits, cash flow, balances, returned transactions, existing obligations, and other financial information.

A signed contract shows an agreement for work. Bank activity provides information about how the business currently earns and uses money.

Consider a contractor with several regular customers and one new project. Existing deposits can help demonstrate an operating history while the new contract explains the upcoming expense.

Fundo can also consider business income from more than one client or platform. Its guide to multiple 1099 income sources explains how those receipts can contribute to the overall business picture.

Before applying, make sure you can explain your income sources and current obligations accurately. Review what Fundo looks at during bank-account underwriting so you understand the information behind the decision.

How do you apply with Fundo?

Fundo’s application process begins with basic information and bank verification through Plaid, followed by review.

Bank verification allows Fundo to review authorized financial information. Fundo states that it does not store bank login credentials through its Plaid connection.

Have a clear business purpose and funding amount in mind. The application should reflect your actual operations, rather than counting an unsigned proposal or anticipated payment as money already received.

Before applying, also check location availability. Fundo’s current FAQs state that service is unavailable in California and New York.

Will the contract remain worthwhile after funding costs?

A project needs enough margin to absorb the cost of funding as well as the cost of doing the work.

Return to the hypothetical $18,000 cleaning contract. Suppose total direct project costs are $12,000. That leaves $6,000 before overhead, financing costs, and taxes.

If the hypothetical financing cost is $750, the remaining amount becomes $5,250 before overhead and taxes. The $750 is an illustration, not Fundo pricing.

Check both profitability and timing. A profitable project can still create a cash shortage if required outflows arrive before customer receipts.

Before accepting an offer, identify:

• Net funds received: What reaches your account after any deductions?
• Total cost: What does the financing cost beyond the funds provided?
• Total obligation: What amount is payable or what future receipts are sold, as applicable?
• Timing: When do payments or remittances begin, and how often do they occur?
• Adjustment process: What steps apply if revenue changes?
• Restrictions: Are there conditions affecting additional financing, receivables, or other business assets?

Do not assume an automatic debit pauses because one customer pays late. Understand the agreement’s actual procedures.

What should you have ready before funding a contract?

Prepare a short project file containing:

• The signed agreement and scope of work.
• Customer payment terms and billing contact.
• Milestone acceptance requirements.
• Supplier quotes and labor estimates.
• A dated cash forecast, including a delayed-payment scenario.
• Existing financial obligations.

This is a planning checklist, not a statement that Fundo requires every document listed.

Also review cancellation and change-order terms. If the customer requests additional work, document the price and payment timing before allowing the extra scope to consume your cash cushion.

Frequently Asked Questions

Can I get funding with a signed contract but no business revenue?

A signed contract may support a request for contract-specific financing, but it does not guarantee approval. Fundo’s published requirements include existing business revenue and operating history. A new contract alone does not replace those requirements.

Can a sole proprietor apply without an LLC?

Yes. Eligible sole proprietors can apply with Fundo without forming an LLC. The business must still satisfy the applicable eligibility and underwriting requirements.

Can I apply if customers pay into my personal checking account?

Yes, a personal checking account may be accepted in qualifying situations. Fundo still needs to verify and review the business activity associated with the application.

Can I combine a customer deposit with financing?

Potentially, if the agreements permit it and the combined obligations fit your cash flow. Count the deposit only once, disclose existing financing, and check for restrictions before combining funding arrangements.

What if the customer cancels the contract?

Cancellation does not automatically cancel a separate financing agreement. Review both agreements to understand responsibilities for purchased materials, completed work, refunds, and any continuing payments or remittances.

Does the customer’s contract value determine my Fundo offer?

No. The contract amount does not establish a matching funding offer. Fundo reviews the operating business’s financial activity and other underwriting information to determine eligibility and any offer.

Put a workable funding plan behind your next contract

Before committing to the start date, identify the largest cash gap, confirm payment milestones, and compare funding costs against the job’s expected margin.

If you already operate a business and need capital for the expenses behind new work, Fundo’s Revenue-Based Financing may be relevant to your next step.

Have a new contract and business expenses to cover?

Apply for Fundo Revenue-Based Financing today to see whether your business qualifies!

Approval, funding amounts, and terms are subject to underwriting. Funding is for business purposes only.