cash flow funding

What is Cash Flow Funding & Why is it Important?

Posted January 22nd, 2025

A growing contractor, been in business about 3 years, starting to get a handle on cash flow funding and generate some strong partnerships and leads with getting renewal contracts on projects, feeling good about the direction your business is headed with multiple projects going on at the same time, but then you check your business bank account, and it looks like the barren desert, with little to no funds!  You are in a cash flow drought! Does this sound anything like you?   This is common in construction!  This industry is unique in the sense that contracts are paid after the work is done, and payments are often not even guaranteed by a specific date or on a regular cadence.  

Construction contractors are often paid differently compared to other industries due to the unique nature of their work, and there are some key differences, one of which is project-based payments.  This is when contractors are typically paid based on project milestones or phases, such as a payment after completing the electrical work on an apartment complex.   Another similar form of payment is progress billing, which is when a contractor submits monthly invoices for the work completed on a project.  As one can guess, all of this gets tricky and makes predicting payments and cash flow on a job challenging.  

This is due to the fact that there are so many circumstances that go into completing a project, and unfortunately, things do not always go as planned.  Oftentimes, work on a project can risk getting delayed due to weather or seasonal conditions such as hurricanes or blizzards.  All of this can affect cash flow funding because payment schedules get delayed.  The economy can greatly impact construction work too.  The availability of dedicated and skilled workers and labor force is a challenge in and of itself.  Additionally, in retainage on a job,  a percentage of the payment is often withheld until the project is completed to ensure all work is done to the client’s satisfaction, typically 10%, which can greatly create a flux in cash flow, especially if it comes much later than anticipated.  Lastly, if not properly accounted for in their bids or pricing structure, insurance, and risk premiums add a lot of cost, thus heavily influencing cash flow structures. 

With all this being said, one can easily picture the chaos of trying to manage cash flow cycles, predicting when gaps in cash flow will arise and anticipating when additional funds are needed on construction projects to keep them moving.  More times than not, gaps exist before the projects even begin because there are so many material costs and labor fees needed upfront in order to get mobilized on the project.  What if there was a solution, or finance partner that could provide funding when you needed it most?  As in, before the project started, or right when your cash flow fell into the red zone?

Today may be that lucky day!  There is a such thing as Cash Flow Funding, in the construction world, it is better known as Mobilization Funding.   This unique style of funding, is a type of business financing where a loan is provided based on the company’s expected cash flows.  Essentially, the loan is backed by the money a company anticipates generating from its project’s contract and milestone payments.   This uniquely structured loan program is designed to help a company execute the work they have available to them by providing access to cash at the start of a project or contract.  When the company has revenue in the form of a contract, purchase orders, or a service agreement, Mobilization Funding can help them.  These loans provide the money needed to pay for labor, materials or other project-related costs before the company invoices their customer. This allows the company to get started on the project in the most efficient manner by removing the barrier of, “Do I have enough cash to do it the way it should be done?” They can get on a project with the right amount of labor, order the materials needed in the best form and timing, use the right equipment, and so on. 

Why is Cash Flow Funding or Mobilization Funding Important?  

  1. Convenience: Funding when cash is needed most allows businesses, especially those without direct lines of capital or banking relationships or an open line of credit to, access immediate funding. This is particularly useful for construction companies, as many contractors have irregular revenue patterns or those that generate substantial cash from finished projects, and their cash surplus is usually tied up in other projects. 
  2. Stability: Positive cash flow ensures that a business can cover its operational expenses, such as paying suppliers, employees, and other operational costs. This is crucial for maintaining day-to-day operations and avoiding financial distress.
  3. Growth: With adequate funding capabilities, businesses can reinvest in their operations, expand their projects, and take advantage of new contract opportunities without the need for additional funding.  This construction cash flow financing program is built to help you grow. You can confidently bid on bigger projects because you know you won’t have to finance the labor out of your own pocket. You can take on the extra work without putting a financial strain on the business, but still do the work and grow the business. MF’s loan structure is designed to be paid back as you get paid on the project. 
  4. Success Indicator: Cash flow is a critical measure of a business’s financial health. Positive cash flow indicates that a company is generating enough revenue to meet its obligations, while negative cash flow, for prolonged periods of time can be a warning sign of potential financial trouble.

In summary, the cash flow funding model at Mobilization Funding is vital for helping construction contractors and manufacturing businesses continue to grow, while taking on new contracts, and keeping them cash flow positive throughout their projects.  We work with our clients to align our repayment plan to their pay apps, minimizing the strain of repaying a loan on top of managing your business. 

 Having a financial partner, especially one who is an expert in cash flow funding, can greatly improve the strength of your company, and that is exactly what Mobilization Funding can provide you!  You DON’T need to qualify for a loan in order to receivefunding advice.  

Mobilization Funding also offers a network of experts outside of the financial aspect in industries like insurance, legal, equipment, and more who are ready to help when one of our clients has a question.  After speaking to one of our cash flow experts, you may even discover you don’t need a loan, you may just need a cash flow tool, like this one, PROJECT CASH FLOW ESTIMATION TOOL that helps you analyze where your cash is coming and going throughout your various projects.   Having this solid understanding, a partner you can trust, and even a financial capability letter from that partner will also improve your bid, winning you more work.  In closing, the goal is to help set your business up for success!   

The cash flow funding model and cash flow consultants at Mobilization Funding can provide you with stability, convenience, a pathway to growth, and peace of mind that funds can be available when your cash flow runs dry.