Contractors: Covering Payroll Before a Payment Draw

Step 1: Know the date, not just the amount

Most contractors know what they are owed. Fewer know the date the money will realistically arrive. Write down, for each active job, the amount billed, the date it was submitted, the contract's payment terms, and the person who approves it. The date you can reasonably expect payment, not the date the contract says, is the one your plan should use.

Step 2: Line up the outflows

1. Next payroll, including taxes and any overtime.
2. Material orders due before the draw arrives.
3. Equipment rentals and subcontractor payments.
4. Fixed costs such as insurance, shop rent and truck payments.

The total of those, minus cash on hand, is the amount you need to bridge. If it is small, a vendor conversation may solve it. If it is large, move to the next step.

Step 3: Check what Texas law says about late payment

Texas Property Code section 28.004 provides that overdue amounts accrue interest from the day after the due date at 1-1/2 percent per month. Separately, section 53.052 sets out how a lien affidavit is filed with the county clerk, and for a non-residential original contractor the deadline is the 15th day of the fourth month after the month the work was completed.

Those are summaries of the statutes, not legal advice. A contractor who is owed money should speak with a Texas attorney about their rights on a particular job. Statutory interest does not pay Friday's payroll, which is why the practical question is how to bridge the gap.

Step 4: Choose how to bridge

Step 5: Size it, and plan the repayment

Round numbers, for illustration only: a contractor needs $9,000 of payroll and $14,000 of materials before a $60,000 draw arrives in about three weeks. The bridge is $23,000 plus a modest buffer, and the draw covers it when it lands. These numbers are made up and are not terms we offer.

If the draw is delayed again, the buffer is what keeps one late check from becoming a second emergency. Avoid sizing to the exact day.

Funding from $25,000 to $5,000,000 can arrive in as little as 24 hours. The application takes about five minutes and sole proprietors can apply.

Step 6: Fix the pattern, not just the week

After the draw lands, take ten minutes to review what happened. Did the payment arrive when you expected? Did you bill promptly? Was paperwork complete? A contractor who bills the same day a milestone is approved, with every required document attached, often shortens the gap by days without borrowing anything.

Next, look at the contract terms on your next bid. Ask for a mobilization deposit, shorter payment terms or smaller, more frequent draws. Each of those moves reduces how much you ever need to bridge, and a request that costs nothing is the cheapest funding there is.