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By Travis Yule — CEO & Founder, Full Send Funding
A $4 million contract bottoms at −$956,364 on day 105, the day before the second draw; each day of payment lag adds $10,000 to that trough.
In one sentence: The first ninety days of a $4,000,000 contract dig a $956,364 hole that bottoms the day before the second draw — a formula of cost to date less the first draw — in which mobilization proper is a quarter, the payment clock adds $10,000 a day, and the schedule of values moves the peak by at most $150,000.
A $4,000,000 contract needs about a quarter of its own value in cash before it starts paying for itself. On the worked example in this article — a twelve-month job at an 88% cost of work, billed monthly, paid 45 days after each application, with 10% retainage — the cumulative cash position bottoms at $956,364 on day 105, the day before the second draw lands. Mobilization proper, the bonds, insurance, site set-up and material deposits that the word usually means, is $220,000 of that. The other three-quarters is ordinary production cost — payroll, material, equipment, the first subcontractor invoices — carried across the distance between doing the work and being paid for it.
That is why the usual framing is wrong. "Mobilization is 10%" is a bid convention on highway work, not a measurement of what the first ninety days cost, and a contractor who plans the first quarter of a job around it will be roughly $550,000 short on a $4 million contract. The finding from the arithmetic is that the shape of the schedule of values — how much of the price sits in the early lines — moves the peak by at most $150,000 in either direction, while the payment clock moves it by $10,000 for every day of lag on every shape. Each fifteen days between application and deposit adds $150,000 to the trough. A mobilization pay item that pays out only when 5% of the contract has been earned is worth nothing at the bottom of the hole, because a half-speed first month does not reach 5%.
There are exactly three sources for that money: the owner's, through the contract's payment provisions; other people's, through supplier and subcontractor terms; and borrowed capital, sized to the trough rather than the contract. This article works through the ledger, the clocks, the front-loading rules, what the state specifications actually grant, and what we read when a contractor brings us a signed contract and a first-draw problem. This is information, not legal advice; the statute and the contract control, and a construction attorney in your state should read yours.
Every number below is an input you can replace with your own. The contract is $4,000,000 for a twelve-month heavy-civil job — a prime contract on public work, so a bond is in play and a mobilization item is possible. The cost of work is 88% of the price, $3,520,000, which leaves a job-level gross margin of $480,000 before the contractor's own overhead. The costs fall in two groups.
Day-one costs, $220,000, paid before any work is in place. On any federal construction contract above $100,000 the contractor must furnish a performance bond and a payment bond before award [6], and the state Little Miller Acts and many private owners require the same. There is no public dataset for bond premiums, which vary with the contractor's surety programme; the example assumes 1.5% of the contract, $60,000, invoiced at execution. Project-specific insurance — builder's risk, the additional-insured endorsements, a railroad protective policy where one is needed — is set at $20,000. Site set-up, temporary facilities, survey control, submittals and the project engineer's first weeks are $40,000. Deposits on long-lead material — the precast, the valves, the switchgear that a supplier will not release to fabrication without money down — are $100,000. None of these four produces a line on a progress billing that an owner is obliged to pay on the first application, which is the whole problem.
Production cost, $3,300,000, paid as it is incurred. The job runs at $300,000 a month in months two through eleven and at half that rate, $150,000, in the first and last months while crews ramp up and demobilize. That is $10,000 a day at steady state. Inside it, labour is the most rigid: it is paid weekly, and it is paid gross of everything the employer owes on top of the wage. In the Bureau of Labor Statistics' March 2026 employer-cost survey, wages and salaries were 69.9% of private-industry compensation and benefits 30.1% [7], which means every $100,000 of wages carries about $43,000 of burden, paid with the payroll or on monthly deposit and premium schedules rather than at year end. Material is paid on the supplier's terms, equipment on the rental house's or the lender's, and subcontractors on whatever the subcontract says — and each of those is a lever the section on financing comes back to. In the base case, all of it is paid as incurred, which is the honest starting point because it is what a contractor without negotiated terms actually does.
The revenue side has one input: the contract is billed at the end of each thirty-day period for the work put in place, the owner approves and pays 45 days later, and retains 10% of each payment until completion. The 45 days is an assumption for private and municipal work; the federal clocks are shorter and are treated separately below.
With those inputs the position of the job on any day is cost paid to that day less draws received to that day, and it is worth writing out, because the shape of it is the finding.
Inputs: contract $4,000,000 over twelve 30-day months; cost of work $3,520,000, of which $220,000 is paid on day 0 (bond premium $60,000, project insurance $20,000, site set-up and submittals $40,000, long-lead material deposits $100,000) and $3,300,000 is production cost paid as incurred at $150,000 in months 1 and 12 and $300,000 in months 2 to 11 — $10,000 a day at steady state. The schedule of values spreads the full price over production cost pro rata, so value earned is production cost × 4,000,000 ÷ 3,300,000. Each application is submitted on the last day of its month and paid 45 days later less 10% retainage. Cash position is draws received less cost paid; "before draw" rows are the same day before the deposit lands. Every value recomputes from these inputs.
Three things are visible in the ledger that are not visible in a bid.
The first draw does not close the gap; it barely dents it. The first application bills the half-speed first month — $181,818 of contract value on a schedule of values that spreads the price evenly over the cost of the work — and pays $163,636 after retainage on day 75. By then the job has spent $820,000. The second application is for a full month, but the money for it does not arrive until day 105, and in the thirty days between the job spends another $300,000. The position bottoms at $956,364 the day before the second draw.
The peak is a formula, not a surprise. For any job whose first month is slower than its steady state, the low point falls just before the second draw, and it equals the cost paid to that day less the first draw net of retainage. On this job that is $220,000 of day-one cost, $150,000 of first-month production, $300,000 of second-month production and 45 days of third- and fourth-month production at $10,000 a day, less $163,636: $506,364 plus $10,000 for every day of payment lag. At 45 days, $956,364. Your job has a different daily rate and a different first draw, and the same two-term formula.
After the trough, the job pays itself back at $27,273 a month. At steady state each draw is $363,636 less 10% retainage, $327,273, against $300,000 of cost — a monthly surplus of $27,273. From a $956,364 hole that is thirty-five months of surplus, on a twelve-month job. The position never closes during construction; it closes when the retainage is released. The trough is therefore not a ninety-day problem in the sense of lasting ninety days. It is a ninety-day problem in the sense that the first ninety days of spending dig it, and the rest of the job lives in it. Why profitable contractors are illiquid is the long-run version of the same mechanism.
Because the trough is a daily rate multiplied by a lag, the clock matters more than anything on the schedule of values. The figure holds every other input fixed and moves only the days between application and deposit.
Every 15 days of payment lag adds $150,000 to the trough on every schedule shape; the shape itself moves it by at most about $150,000, and a mobilization item on a 5%-earned trigger is worse at the trough than no item at all.
Same job as the first table: $220,000 paid on day 0, production cost of $150,000 in month 1 and $300,000 a month after, 10% retainage, applications on day 30, 60, 90 and so on, each paid the stated number of days later. Peak is the largest of, over draws 1 to 6, cost paid on the draw day less draws received before it. Value earned per application: pro rata, production cost × 4,000,000 ÷ 3,300,000; fixed-cost line, $136,364 (bonds, insurance and set-up of $120,000 at the job’s 13.6% average mark-up) on application 1 plus production cost × 3,863,636 ÷ 3,300,000; Washington triggers, production cost × 3,600,000 ÷ 3,300,000 from the other items plus 50% of the $400,000 item (or 5% of the contract if less) once 5% of the contract has been earned from other items and 100% (or 10% of the contract if less) once 10% has; Texas first tier, the same other-item value plus 50% of the item (or 5% of the contract if less) on the first application once 1% of the contract is earned, with later tiers not modelled because they cannot move the peak. Payment lags: 14 days is the federal prime’s clock, 21 the federal first-tier subcontractor’s, 30 to 60 assumed for private and municipal work.
The federal clocks are the floor. Under the Prompt Payment clause in a federal construction contract, a progress payment is due 14 days after the designated billing office receives a proper payment request [2], and the Prompt Payment Act obliges the prime to pay each subcontractor within 7 days of receiving payment for that subcontractor's work [3] — so a prime's clock is 14 days and a first-tier subcontractor's is 21. The clock starts on receipt of a proper invoice: under the government-wide prompt-payment regulation, the period an agency has to pay begins on the date it receives a proper invoice, and an improper one must be returned within 7 days with every defect identified [4]. An application with a missing certification or an unsupported line does not start a slow clock; it starts no clock at all, and comes back a week later to be resubmitted. Retainage on federal fixed-price construction is discretionary rather than automatic — the contracting officer may retain up to 10% of a progress payment if satisfactory progress has not been made, and is to pay in full where it has [1] — and retained amounts, once approved for release, are due 30 days after approval [2]. Government contracts and the payment cycle covers what those clocks do over a whole contract.
Private and municipal work has no floor. A general contractor's application goes to the architect for certification, then to the owner, then to the owner's construction lender for a draw inspection, and each stage has its own calendar; 45 days from application to deposit is ordinary and 60 is not rare. Under the fifty-state prompt-payment rules many statutory clocks run from receipt of the application, several only from its certification or approval, and approval is the step the contractor does not control. Read the figure's 45-day and 60-day columns as the private-work case: $956,364 and $1,106,364 on the pro-rata schedule, against $646,364 for a federal prime on the same job.
On any job billed by percentage of completion, the schedule of values decides what each month's work is worth on paper. It is the itemized breakdown of the price by element of work — on federal fixed-price construction the request for a progress payment must itemize the amounts requested by element of work, and payment is made monthly on estimates of work accomplished that the contracting officer approves [1]. The figure compares three shapes.
Pro rata. Bonds, insurance, set-up and the rest of mobilization have no line of their own; their cost is buried in the work items and billed as those items go in. This is the worst shape for the contractor, and it is common on subcontracts drafted by a general contractor who would rather not see a large first application.
A front line for the fixed costs. The schedule carries a "bonds, insurance and general conditions" line and bills it in full on the first application. On the worked example that line is $136,364 — the $120,000 of bonds, insurance and set-up at the job's average mark-up of 13.6% — and it lifts the first draw from $163,636 to $280,785 after retainage. The peak falls by $117,149 at every payment clock. It costs the owner nothing over the job and costs the contractor nothing to ask for, and it is the single most useful line in the document.
A separate mobilization item, paid on triggers. The highway model, treated in the next section; on the figure it is drawn twice, because the trigger decides whether it helps at the trough or after it.
Front-loading beyond the fixed-cost line — putting more of the price in the early lines than their share of the cost — has three limits, and they arrive in this order. The first is the reviewer: on federal work every offer with separately priced line items is analysed for unbalanced pricing, which the regulation defines as one or more line items significantly over- or understated despite an acceptable total, and it names start-up work and mobilization as separate line items as the situation where the risk is greatest [5]. The second is the owner's lender, whose draw inspector compares the application to work in place and whose approval is a condition of the owner having money to pay with. The third is arithmetic: front-loading is over-billing, it reverses in full by the last application, and until it reverses it shows on the WIP schedule as billings in excess of cost — cash that a lender reads as borrowed, not earned. A front-loaded schedule buys a smaller trough in month three at the price of a larger one in month ten, when the late applications bill less than the cost going in.
What federal construction does allow is narrower and more useful than front-loading. The payments clause lets the contracting officer take material delivered to the site, and preparatory work done, into consideration in preparing the estimate, and material delivered elsewhere where the contract specifically authorises it [1]. A contractor who receives the long-lead material in month one and bills it as stored material recovers the deposit on the first application instead of on the application for the month it is installed. Most private contracts have a stored-materials clause of the same kind, with a bill of sale, an insurance certificate and a storage location as the conditions. It is the lever most often left unused.
On highway and heavy-civil work, mobilization is a bid item, and the standard specifications say both how large it may be and when it is paid. The two questions are separate and the second matters more.
How large. Caltrans' construction manual records that contractors normally bid mobilization at 10% of the original contract amount, which is the maximum that can be paid during the prosecution of the work [8]. The Federal Highway Administration's Western Federal Lands estimating handbook instructs its estimators to use 10% to 11% of the total contract amount as the starting point for the mobilization item [9]. New York's item for mobilization on work-order contracts pays 15% of the amount bid when the contractor demonstrates it is in a state of readiness, with the remainder paid in proportion to the value of work completed [12].
When. Washington's standard specifications pay 50% of the mobilization bid, or 5% of the total original contract amount if that is less, when 5% of the contract has been earned from other items excluding materials on hand; 100%, or 10% of the contract if less, when 10% has been earned; and any excess over 10% only once substantial completion is established [10]. Texas' Item 500 pays 50% of the mobilization lump sum, or 5% of the contract if less, when 1% of the adjusted contract amount for construction items has been earned, with further steps tied to 5% and 10% earned [11].
Put the worked example under each. With a $400,000 mobilization item — 10% of the contract — the other items total $3,600,000, and the half-speed first month earns $163,636 of them, which is 4.1% of the contract. Under the Washington triggers that is below 5%, so the first application carries no mobilization at all, and the first draw is smaller than on the pro-rata schedule because a tenth of the price has been moved into an item that has not triggered: $147,273 after retainage. The whole $400,000 arrives with the second draw, when 12.3% has been earned — which is why the Washington-trigger line in the figure sits above the pro-rata line at every clock. The item is real money; it is not money at the bottom of the hole. Under the Texas first tier, 1% earned is $40,000, reached on the eighth day of the job and $200,000 of mobilization goes on the first application; the first draw becomes $327,273 after retainage and the peak drops to $820,000 at 45 days, the lowest of the four shapes — and it now falls on day 75, the day before the first draw, because a first draw that large leaves the day-105 position at $792,727. Same item, same size, $152,727 of difference at the trough, entirely from the trigger.
The practical reading: on a bid schedule with a mobilization item, find the trigger before the amount. A 5%-earned trigger on a job with a slow first month is a second-draw item, and the first ninety days have to be financed as if it did not exist. On federal building work under the standard payments clause there is usually no mobilization item at all, and the preparatory-work and stored-materials language above is what stands in for one [1].
Every dollar of the trough comes from one of three places, and the order below is the order of cost.
1. The owner's money, through the contract. A fixed-cost line billed on application one; a mobilization item with an early trigger; a stored-materials clause used the month the material lands; and, on private work, a deposit or advance payment negotiated at signature. None of these carries interest. All of them are decided before the contract is signed, and none can be added afterwards without a change order the owner has no reason to grant. On the worked example the fixed-cost line alone is worth $117,149 at the trough, and a 1%-trigger mobilization item is worth $136,364 more than the pro-rata case.
2. Other people's terms. Material on net-30 or net-60 from a distributor moves a month or two of material cost out of the trough; at 40% of production cost, thirty days of terms on this job is $120,000 of trough that the supplier is carrying. Subcontractors on a pay-when-paid schedule are carrying their own share until the draw arrives — which is what pay-when-paid versus pay-if-paid is about from the other side of the table. Rented equipment is paid monthly in arrears. The cost of this source is whatever the supplier prices into the terms, which is often nothing visible and occasionally a forfeited early-payment discount that is far from nothing: a 2% discount for paying in 10 days rather than 30 is 2% for 20 days, and forgoing it costs about 37% a year on the money.
3. Borrowed capital. A bank line, where the contractor has one with availability left after the last job; contract financing, sized against the signed contract and repaid from the first draws; or a revenue-based advance sized from the bank statements. This is the only source that can be arranged after the contract is signed, which is why it is the one most contractors end up using, and it is the only one with an explicit price.
Cost = amount × annualized rate × 150 ÷ 365, simple interest. The average position is the daily mean of the pro-rata, 45-day-lag cash position in the first table from day 30 to day 180 inclusive (151 days), $706,033. The forgone-discount rate is (2 ÷ 98) × (365 ÷ 20) = 37.2%; prime is held at 7.50% and the bank spread of 1.75% is an assumption from files we see, not a published figure; 15%, 30% and 45% are points inside the firm’s published 4.5%–45% cost-of-capital range and not a quote. Gross margin is $4,000,000 less $3,520,000. Owner’s money and undiscounted supplier terms carry no interest by construction.
Read the table's last column against the job's $480,000 of gross margin. Carrying the trough on a bank line costs 5.6% of the margin; at 15% it costs 9.1%; at 45%, the top of our published range, 27.2%. All of those are smaller than the margin, which is the reason the job can be financed at all. None of them is small, which is the reason the first two sources should be exhausted before the third is sized.
A contractor who brings us a signed contract and a first-draw problem is asking for the third source, and what decides the answer is not the contract's face value. Speaking for how we read it:
The shape that comes out is a term the length of the gap — four months at the short end of our four-month-to-three-year range for a trough that a second and third draw will refill, longer where the retainage position is the real problem — and a fixed daily or weekly ACH remittance — weekly is what we recommend for a contractor paid in draws, because a business paid in draws should not be debited as if paid at a till. The cost of capital runs from 4.5% to 45% depending on qualifications and term length. A decision comes back within 24 business hours; funding follows within 24 hours of approval, and a complete file submitted before 2pm ET can fund the same day. Two structural points matter more on a bonded contractor than the price: we file no UCC-1 lien against the business, so nothing sits across the receivables the surety's indemnity agreement already reaches, and our agreements contain no confession of judgment. The general product is described on working capital loans and the construction-specific structuring on construction financing.
In the order a contractor should pull them, with the effect on the worked example where it can be stated:
Contract financing solves a timing gap. It does not solve the following, and each is worth recognising before a contract is signed rather than after.
A $4,000,000 contract spends about $956,364 before it has been paid for enough of the work to carry itself — $220,000 of it bonds, insurance, set-up and deposits, the rest production cost carried across the payment lag. The peak falls the day before the second draw, and it is a formula: cost to that day less the first draw net of retainage, which on this job is $506,364 plus $10,000 for every day between application and deposit. The clock dominates: a federal prime's 14-day clock makes it $646,364 and a private owner's 60-day clock $1,106,364, on the same schedule of values. The schedule moves the peak by at most $150,000 — a fixed-cost line billed on application one is worth $117,149, and a mobilization item is worth everything or nothing at the trough depending on whether its trigger is 1% earned or 5%. The money comes from the owner through the contract, from suppliers and subcontractors through their terms, or from borrowed capital sized to the trough — in that order of cost, and the first two are decided before signature.
If you have a signed contract and want the trough sized before the first payroll, call 518-312-0382 with the contract, the schedule of values and three months of statements, or check what you would qualify for in about a minute with a soft credit pull only.
The worked example is derived from stated inputs, not surveyed: a $4,000,000 twelve-month contract at an 88% cost of work; $220,000 paid on day 0 (bond premium assumed at 1.5% of the contract, project insurance $20,000, site set-up $40,000, material deposits $100,000); production cost of $150,000 in the first and last months and $300,000 a month between, paid as incurred; applications on the last day of each 30-day month, paid 45 days later in the base case and 14 to 60 days in the payment-clock figure; and 10% retainage on every draw. The three schedule-of-values shapes allocate the same $4,000,000 differently — pro rata over production cost, a $136,364 fixed-cost line billed on application one, or a $400,000 mobilization item paid on the Washington or Texas triggers — and the peak is the largest of, over the first six draws, cost paid on the draw day less draws received before it. The carry table applies simple interest for 150 days to $100,000 and to the daily mean position from day 30 to day 180. Every published number is recomputed from these inputs by the site’s arithmetic audit before publication, and any input can be replaced with a reader’s own.
The bond premium, insurance, set-up and deposit figures, the 45-day private payment lag, the bank spread and the 15% and 30% financing rates are assumptions typical of files we see and are labelled as such; there is no public dataset for bond premiums, private-owner payment lags or the cost of contract financing to a contractor of this size, and none is claimed. What is sourced is stated from the primary text: the federal payments clause for progress payments, itemization, stored material and discretionary retainage; the construction prompt-payment clause for the 14-day and 30-day clocks; the Prompt Payment Act for the 7-day subcontractor pass-through; the government-wide prompt-payment rule for the proper-invoice start and 7-day return; the unbalanced-pricing rule for the limit on front-loading; the Miller Act for the bond requirement; the Bureau of Labor Statistics employer-cost release for the wage-and-benefit split; and the Caltrans, Federal Highway Administration, Washington, Texas and New York documents for what mobilization items are bid at and when they pay. The specifications quoted are the current published editions at the time of writing; each state’s current specification and each contract’s special provisions control.
The reading of a contract file and the sizing rule are the firm’s own practice, stated from the decision side. Other funders and banks weight the same documents differently, and a surety’s treatment of a mobilization position is set by the surety.
On the worked example — twelve months, 88% cost of work, monthly billing paid 45 days later, 10% retainage — the position bottoms at $956,364 on day 105, the day before the second draw. About $220,000 of that is bonds, insurance, site set-up and material deposits; the rest is production cost carried across the payment lag. With a 14-day federal clock the same job peaks at $646,364.
Ten percent is a bidding convention on highway work — Caltrans records that contractors normally bid it at 10% of the original contract amount, and the Federal Highway Administration’s Western Federal Lands estimators start at 10% to 11%. It is not a measurement of what the first ninety days cost: on the worked example the cash requirement is about 24% of the contract, and the mobilization item, where there is one, pays out on triggers tied to the share of the contract earned.
The state specification sets it. Washington pays 50% of the mobilization bid (or 5% of the contract if less) when 5% of the contract has been earned from other items, and the rest at 10%. Texas pays the first 50% (or 5% of the contract) when 1% has been earned. New York’s work-order item pays 15% on demonstrated readiness. A 5% trigger is usually a second-draw item on a job with a slow first month; a 1% trigger is a first-draw item.
A line for bonds, insurance and general conditions billed in full on the first application is normal and worth about $117,000 at the trough on a $4 million job. Front-loading beyond that has limits: on federal work every separately priced line item is analysed for unbalanced pricing and mobilization line items are named as the highest-risk case; the owner’s lender inspects work in place; and the over-billing reverses by the last application and reads as borrowed cash on the WIP schedule.
Fourteen days after the designated billing office receives a proper payment request, under the Prompt Payment clause for construction contracts. The prime must then pay each subcontractor within seven days of receiving payment for that subcontractor’s work. The clock starts only on a proper invoice; an improper one must be returned within seven days with the defects identified, so an application with a missing certification starts no clock at all.
The owner’s money through the contract (a fixed-cost line on application one, an early mobilization trigger, a stored-materials clause, a negotiated deposit on private work); other people’s terms (supplier net-30 or net-60, pay-when-paid subcontracts, equipment rented in arrears); and borrowed capital (a bank line, contract financing repaid from the first draws, or a revenue-based advance). That is the order of cost, and the first two are decided before signature.
From the contractor, not the contract. We read the signed contract for its payment terms and the owner’s funding, the schedule of values for the first two applications, and three or more months of bank statements for what the business can carry. Sizing follows 80% to 150% of average monthly revenue on a term the length of the gap, four months at the short end, with a fixed daily or weekly ACH remittance — weekly is what we recommend for a contractor paid in draws — no UCC-1 lien and no confession of judgment.
When the trough exceeds what the contractor’s deposits will size, which means the job is too large for the business; when the owner’s construction lender has not closed; when the schedule of values was priced below cost, so the position never recovers; when the gap is really a retainage position that closes eighteen months out and needs long-dated capital; and when another advance is already drawing on the same deposits.
Travis Yule founded Full Send Funding in 2021 and leads it from Middle Grove, New York. He writes about working capital from the underwriting side of the table — what the numbers actually have to say before a business gets funded.