Net 30, and whether you can afford it

The general contractor's office sends over a subcontract with Net 30 on it. The job is the biggest one you have been offered. You also know that your supply house wants paying, your crew gets paid Friday, and the check on this job is a long way off.

The question is not whether Net 30 is fair. It is whether you have enough cash sitting still to fund somebody else's payment cycle while the work happens.

General business guidance, not legal or accounting advice. Contract terms, lien deadlines and the enforceability of payment clauses vary a lot by state. Have a construction attorney read a subcontract before you sign one, and confirm cash-flow numbers with your bookkeeper.

Why the GC's office will not budge on 30 days

Net 30 is not the GC's opinion of you. It is the shape of their own money.

They bill the owner monthly on a pay application that an architect or construction manager has to approve. Their own contract holds retainage back. Their accounts payable department cuts checks on a fixed schedule, and the person signing your subcontract has no authority over that schedule. Many subcontracts also carry a pay-when-paid or pay-if-paid clause tying your money to the owner's payment upstream, and how enforceable that clause is depends on your state.

So the negotiation is rarely "30 or 15." It is about what you can move around the 30: what gets paid up front, how often you bill, and what day the clock starts.

Net 30 is rarely 30 days

Terms are measured from a date somebody else controls. Between finishing the work and getting the deposit there are usually four separate delays:

• Billing cutoff. Progress invoices are often only accepted in a window each month, commonly around the 20th to the 25th. Miss it and you wait a cycle.
• Approval. The project manager signs off on quantities, and a signed lien waiver usually has to arrive before the invoice reaches AP.
• The clock's start date. "Net 30 from invoice receipt" and "Net 30 from approval" are two different dates. Get the wording in writing.
• The check run. If AP cuts checks twice a month, day 30 rounds up to the next run.

Plan for the gap from first outlay to cleared funds, not just the stated due date. On a first job with a new GC, use the cautious case.

One job, in cash-out order

A $21,000 commercial tenant-improvement job, three weeks of work, one invoice at completion, Net 30.

The job is profitable. It is also $14,100 of your own money, gone for nearly two months, on a job you priced at a 33% gross margin.

The table leaves out overhead, which continues through the wait and must be funded too.

Sizing the cushion the client needs

The mistake is treating this as one invoice. Once the second job starts, the first still has not paid, and the amount stays out for as long as you keep the client.

Cash tied up = weekly cash out on Net 30 work × weeks to funds clearing

Take that same shop at a steady two-crew pace: roughly $7,000 a week going out in fully loaded labor and materials, and about eight weeks from a week's spend to that money landing.

$7,000 × 8 = $56,000 permanently outstanding

That $56,000 is the real cost of the terms. Then subtract the float you already have:

Compare that with cash in the bank plus unused credit. If the gap is bigger, cap how much work sits on those terms at once.

Cheap ways to shrink the gap

In rough order of how much they help and how likely a GC is to agree:

• Bill monthly instead of at completion. The biggest lever. It turns one 55-day wait into overlapping shorter ones, and it is standard on commercial work, so asking is not unusual.
• A mobilization or material payment up front. A deposit and Net 30 are not contradictory, and funding materials at the start removes your largest single outlay.
• Bill for stored materials. Many contracts allow invoicing for material delivered to site and not yet installed. If yours does, use it.
• Get supplier terms that match. Buy on Net 30 and the material float is not yours to carry. Usually easier to arrange than better terms from a client.
• Nail down the cutoff and the start date. Worth two weeks, at no price concession.
• A line of credit before you need it. Interest on a drawn line is far cheaper than the alternative below, and banks lend more readily when you are not desperate.

Price any early-payment discount against the cash it actually releases; it can be expensive working capital.

What factoring actually costs

Invoice factoring sells the receivable. The factor advances most of the invoice now, holds a reserve, collects from your customer, and keeps a fee.

Fees in construction commonly run a few percent of the invoice per 30 days, with the reserve released when the invoice pays. Annualized, that is usually well into the double digits, sometimes higher than a credit card. Construction receivables are harder to factor than most — retainage, lien rights, disputed change orders and pay-when-paid clauses all add risk — so some factors decline the industry or price it up.

Read for the terms that cost more than the headline rate: whether it is recourse (you buy the invoice back if the customer never pays), whether your customer is notified to pay the factor directly, minimum monthly volume commitments, and the termination notice period. Price a bank or SBA-backed line of credit first. Factoring makes most sense as a bridge on one large contract, not as permanent working capital.

Extending terms is extending credit

Agreeing to Net 30 means lending your customer the cost of the job, unsecured, for a month or more. Banks check people before doing that.

Ask for the AP contact and the billing procedure before the first day of work, not after the first invoice. Ask two other subs who have worked for that GC how they actually pay, which tells you more than any credit report. Confirm the license status with your state licensing board. And find out your state's preliminary notice deadline — in many states it runs from the day you start work, whether or not anybody owes you money yet, and missing it can cost you your lien rights on the whole job.

Knowing what is outstanding, without rebuilding it

Every number above starts with knowing what you have approved, what you have billed, and what has not landed. Keep priced, dated approvals in one place in DoneQuote and totalling the work in progress is a filter rather than an evening of guesswork — and the deposit and terms you decided you needed are the ones that go out in writing, instead of getting retyped from memory on the job that finally breaks your cushion.