Can you borrow money against a contract?

Yes, contract financing allows you to use a contract as collateral for a loan. You can use the cash advance to perform work detailed in the contract. 

Who should apply for contract financing?

If you have a signed contract with a reputable client, then contract financing is an option. That’s especially true if you don’t have the funds upfront to cover the contract costs. 

What does a contract financing payment mean?

A contract financing payment means a payment received from the customer at a predefined point in the contract. Even if work isn’t entirely complete, these payments are made at the necessary milestones along the way. 

What are the typical rates and terms for contract financing?

In general, you’ll encounter a factor fee anywhere from 1% to 3%, but could go higher. If you accept a contract financing agreement, you can expect to receive an advance percentage between 70% to 90%, subject to terms of the exact contract. 

Are there alternatives to contract financing?

Final Word

If you have a signed contract from a reputable client without the funds to start work, then contract financing is a very attractive solution. That’s especially true if a bad credit score makes other loan types cost-prohibitive.

But contract financing only works when there are clear details within your contract. As you negotiate a contract, make sure to get set milestones and payment terms built into the contract. 

About the Authors

Sarah Sharkey

Written by: Sarah Sharkey

Personal Finance Writer

Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions. Sarah enjoys traveling, hiking and reading when she is not writing.

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Kal Salem

Reviewed by: Kal Salem

MA Accounting - Arizona State University

A CPA and finance professional working with small businesses to educate owners and grow alongside their businesses. He holds a Masters in Accounting and a BS in Supply Chain Management. Owner at Salem CPA Services LLC

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Joe Templin

Fact checked by: Joe Templin

Charted Financial Consultant - CAP

Joe Templin is a Charted Financial Consultant (ChFC), MCEC, CEC, CLU and CAP with well over three decades consulting, coaching, and teaching. He's an author of the Amazon Kindle #1 New Release "Every Day Excellence" and host of The Human Kaizen Podcast.

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