Key Takeaways
- Progress claim finance is a type of financing that helps construction businesses that get paid in stages.
- Progress claim finance enables contractors to access funds from approved claims before clients make payment, helping them meet ongoing payroll obligations.
- Using progress claims brings cash recognition forward to help fund payroll, ensuring workers and subcontractors are paid on time during longer construction payment cycles.
- Lenders typically advance a percentage of the approved progress claim amount, usually around 80%, depending on project stage and lender policy.
Contractors who work on construction or big infrastructure projects can feel a lot of pressure on their cash flow when payments are late. Payroll and client payment cycles don’t always match up perfectly, which can put a lot of stress on a business. Progress claims finance is a solution that lets contractors turn approved but unpaid claims into cash right away. This kind of funding gives you a reliable way to pay your employees without having to wait weeks or months for payments from clients to come in.
Can I Use a Progress Claim to Pay My Staff?
Yes, progress claim finance can be used to pay staff, subcontractors, and associated labour expenses. The facility works similarly to invoice finance but is tailored to construction contracts where payments are tied to certified milestones rather than standard invoices.
Understanding Progress Claim Finance
Progress claims are milestone based invoices submitted to clients throughout the course of a project. They reflect the value of work completed to date and are approved according to agreed contract terms. In many Australian construction contracts, payments are released anywhere from 30 to 90 days after the progress claim is lodged. That delay often means contractors must cover wages, supplier costs, and overheads long before receiving payment.
Progress claim finance Australia bridges this timing gap by advancing funds against approved claims. The lender reviews the claim documentation, confirms client acceptance, and then provides a portion of the claim amount as upfront funding. Once the client pays the progress claim, the lender is repaid, and the contractor can continue operating smoothly.
Why Contractors Use Progress Claims to Fund Payroll
One of the biggest ongoing costs for contractors is payroll. No matter when the project is due to be paid, tradespeople, site supervisors, project managers, and subcontractors all need to be paid on time. If a client doesn’t pay on time, even for a short time, it can lead to missed payroll deadlines, damage to your reputation, or work being stopped on site.
Contractors can keep their cash flow steady throughout each stage of a project by using contractor payroll finance in Queensland or anywhere in the country. Using progress claims finance to pay wages can help businesses accomplish the following:
- Pay staff and subcontractors on time
- Keep projects moving without delay
- Maintain trust with suppliers and workers
- Avoid relying on short-term overdrafts or personal funds
How Contractors Fund Payroll with Progress Claims
A contractor can send a progress claim to a specialist lender for review once it has been approved. The lender checks the approval and the payment schedule, then sends a percentage of the claim value, usually within 24 hours to a few business days.
You can then use that money right away for payroll and other business costs. When the client pays the claim, the money is used to pay back the lender, along with any interest or fees that may apply. This cycle can happen at each project milestone, which makes a steady flow of funds that helps both payroll and getting the project done.
How Do Progress Claims Cover Payroll Costs?
When a contractor gets an advance on a certified progress claim, the funds become working capital that can be used for any business expense. Payroll is one of the most important expenses to keep the business running.
Progress claim advances can be used to:
- Cover weekly or fortnightly wages
- Pay subcontractor invoices
- Fund leave entitlements or overtime
- Maintain payroll tax and super contributions
By converting pending claims into cash, contractors avoid the cycle of waiting for delayed payments and scrambling to meet payroll commitments at the end of each pay period.
What Percentage of a Progress Claim Can Be Used for Payroll?
The amount available for payroll depends on the lender’s advance rate, which is usually 80% of the approved claim value. The remaining percentage is held until the claim is paid by the client.
For example, if a contractor submits a progress claim worth $500,000 and the lender advances 80 percent, the contractor would receive $400,000 immediately. That sum could then be allocated to payroll, supplier payments, or other project costs, while the lender awaits repayment once the client settles the invoice.
Is It Legal to Fund Payroll with Progress Claim Advances?
Funding payroll via progress claims in NSW or anywhere in Australia is perfectly as long as it’s done through an authorised lender or finance provider. The arrangement is legal in the same way as invoice or debtor finance, but it is only for the construction industry’s milestone payment model.
The most important thing to do to stay in compliance is to make sure that the funds are based on certified progress claims that accurately show what work has been done. It is perfectly fine to use those funds for payroll or other project related costs as long as the claims are valid and meet the terms of the construction contract.
The Benefits of Progress Claim Finance for Contractors
Beyond immediate payroll funding, progress claim finance provides several broader advantages for contractors:
- Improved cash flow: Contractors can maintain predictable access to funds even when customers take weeks to pay.
- Reduced financial stress: Directors and business owners can meet obligations without relying on personal resources or overdrafts.
- Project continuity: Adequate funding ensures uninterrupted work on site, avoiding costly downtime or delays.
- Better supplier relationships: Regular payments foster stronger trust with subcontractors and suppliers.
- Business growth potential: With reliable working capital, contractors can take on more projects without being limited by slow client payments.
Choosing the Right Lender for Progress Claim Finance
Selecting a lender experienced in construction finance is important. The right finance partner will:
- Understand progress claims contracts, set off clauses and retentions
- Offer transparent terms with clear repayment structures
- Provide flexible advance percentages based on project risk
- Deliver quick approval and settlement timelines
Finding a reputable lender is easy with the help of a qualified mortgage broker. At Dark Horse Financial, our expertise in contractor finance means we help clients secure funding solutions aligned with their project demands.
Final Thoughts
Progress claim finance gives contractors all over Australia a dependable way to pay their employees without having to wait for clients to pay them. This way of funding makes sure that staff and subcontractors get paid on time by advancing a portion of certified claims. This keeps projects going and boosts morale among workers. Progress claim finance gives contractors in Australia’s demanding construction environment the flexibility and stability they need to pay for wages, superannuation, or other labour costs.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Pay Your Employees With Progress Claim Finance
Progress claim finance can give you the working capital you need to keep things running smoothly if you’re in charge of big projects and payments are late. Call Dark Horse Financial to find out how progress claim funding can help you pay your employees and improve your cash flow plan.
