Price the full cost of bridging a late progress payment

A short loan can create a longer problem

The progress payment is late and a lender offers fast money to cover the gap. Before accepting, establish what will leave the bank account and when. The advertised rate alone does not show whether the business can manage the repayments if the builder delays again. Obtain the complete proposed terms and review them with your adviser.

Start with the cash actually available

Imagine a concreting contractor offered a loan to cover wages and materials. Establish the amount received after any upfront deductions, then compare it with the immediate shortage. A facility described by its face value may leave less usable cash than expected. Do not build the payment plan around money that will be retained as fees.

Put every repayment on the calendar

List the scheduled amounts, fees and other charges under the proposed terms. Include existing commitments alongside them. business.gov.au describes cash flow forecasting as estimating future income and costs to identify whether income can cover costs. Use the proposed loan dates in that forecast rather than treating the borrowing as a single positive deposit.

Source: business.gov.au: Set up a cash flow statement

Test a second delay

Move the expected progress receipt beyond the first repayment date. Ask what funds the repayment then and whether the loan permits any flexibility. In the concreting example, weekly deductions may start before the builder pays. A temporary shortage can deepen if fresh borrowing is needed just to meet the first loan's payments.

Read the wider commitments

Ask your adviser to explain proposed security, guarantees, default provisions and early repayment terms. These details can matter beyond the quoted price. Compare available alternatives on a consistent basis, including their timing and practical limits. Do not assume a supplier arrangement or another funding source is available until the relevant party has agreed.

Make a documented decision

Record the expected benefit, total cost, repayment source and downside if the receipt does not arrive. If the numbers show an ongoing inability to meet obligations, obtain prompt professional advice about the wider position. Finance should be assessed against the business's capacity to repay, rather than accepted solely because it buys a few quieter days.