A contractor can have a signed project and a full crew at work, yet still struggle to make payroll. Workers must be paid as work happens. A progress payment, on the other hand, may depend on completing a stage of the job, sending documents, having the work checked and then waiting for money to arrive.
That gap can put pressure on an otherwise promising project. The starting point is to map when work must be paid for and when usable cash is expected to reach the business.
Why a progress payment may arrive after payroll
A progress payment is money a customer pays as a project reaches agreed stages. A contract might say the contractor can invoice after completing a certain amount of work. That does not necessarily mean the money arrives the same day the work is done.
A customer may need to review quantities, approve an invoice or confirm the work. The contractor may also be waiting for money from a general contractor rather than directly from the project owner. The exact steps depend on the contract and applicable law.
A holdback is money kept back from a construction payment until conditions set by the contract or applicable law have been met. Whether money must be held back, how much and when it can be paid depend on the project and the rules where the work takes place. A contractor should check those terms rather than assuming one rule applies across Canada. For federal public construction work, specific prompt-payment rules exist; they should not be treated as the rules for every private project. [1]
A project-payment calendar
Imagine a contractor starts a Canadian project with $30,000 in available cash. The following example is invented. It assumes specific contract events for illustration, without claiming that these dates are required by law.
| Project day | Event | Cash change | Balance |
|---|---|---|---|
| Start | Opening cash | — | $30,000 |
| 2 | Materials deposit | −$18,000 | $12,000 |
| 7 | Crew payroll | −$22,000 | −$10,000 |
| 10 | Progress invoice submitted | $0 received | −$10,000 |
| 14 | Subcontractor payment | −$15,000 | −$25,000 |
| 21 | Invoice reviewed; cash not received | $0 received | −$25,000 |
| 30 | Customer progress payment | +$40,000 | $15,000 |
The lowest projected balance is −$25,000. If the contractor wants to keep a $10,000 reserve, the planning gap is $35,000 under these assumptions.
Now test a longer delay. If the $40,000 payment arrives on day 37 instead, and another $20,000 payroll falls on day 28, the forecast reaches −$45,000 before the customer's payment. With the same reserve, the planning need increases to $55,000.
Those figures are not suggested loan amounts. They show why a project that looks profitable on paper can require money before it produces cash.
Check the contract before choosing financing
Find the point at which you are allowed to submit a progress invoice, what documents are required for approval and how customer disputes are handled. Confirm whether the contract holds back any money and when that amount may become payable. If a general contractor sits between you and the owner, identify which party owes each payment and what evidence of approval you have.
Keep project costs separate from the cash needed to run your other jobs. A payment delay on one contract should not be allowed to hide payroll pressure elsewhere in the company. If the project changes or extra work is required, record how that affects material orders, labour and the next invoice.
Provincial and federal payment rules can affect contractual rights and deadlines. This guide does not interpret those rules for your contract. A qualified construction lawyer or appropriate adviser should review any payment dispute, lien or legally required payment obligation.
What financing may be worth exploring?
Working capital financing can be considered when payroll and other operating costs arrive before project cash receipts. A business line of credit may be another option when payment gaps repeat over different jobs. Whether either is suitable depends on the business, lender terms and its ability to make repayments if a progress payment is late.
Do not assume every construction contract qualifies for purchase order financing. A supplier purchase order and a construction progress-payment contract may be reviewed differently by a lender. The type of work, customer, supplier costs and supporting documents matter.
A useful comparison includes the full amount you receive, interest and fees, required payment dates, security and what happens if the customer pays later. Our business financing cost guide explains how to compare offers.
What should you prepare?
A financing provider may ask for signed contracts, the project schedule, approved progress invoices, bank statements, current job costs, other debts and a forecast covering the next payroll dates. Some may also examine whether the contract allows assignments or other security arrangements. Requirements vary by lender.
BGC is a Canadian financing broker, not a direct lender. We review financing requests and may share full applications with selected funding partners under the site's consent process. Review general eligibility, or apply for financing if your company needs to explore a temporary construction cash gap. BGC's general application range is CAD $30,000–$5 million; actual lender eligibility depends on the file.
Sources
- Public Services and Procurement Canada — Prompt payment in the construction industry. Describes federal-public-construction payment principles and their scope.
- BDC — Financing for payroll: How to pay salaries in a cash flow crunch. Explains financing questions when payroll and customer collections fall on different dates.
Illustrative project cash calendar only. The timing, security, holdback and legal obligations of a real construction contract require contract-specific and jurisdiction-specific verification.