MEP CLUSTER · ELECTRICAL · CASH FLOW

ELECTRICAL CONTRACTOR MATERIAL BUYOUT CASH FLOW.

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Switchgear lead times run 14–26 weeks on commercial projects. You order it the day the contract is signed. The deposit — typically 30–50% of the gear cost — comes out of your cash or LOC immediately. The gear arrives on site in week 14. You install it in week 18. You bill it in week 18. You collect it in week 24. From deposit payment to cash collection: 24 weeks of carrying the cost of a $60,000–$150,000 gear package before a dollar comes back.

This is the single largest cash flow timing problem in commercial electrical subcontracting and it is entirely structural — built into how electrical work is sequenced and how GC billing cycles work. Understanding it, building it into every cash forecast, and structuring the SOV to recover material cost as early as possible are the three tools that keep electrical contractors from maxing their LOC on profitable projects.

BY JOSH LUEBKERPublished: May 2026Updated: May 2026

THE TIMELINE

HOW A $480K ELECTRICAL CONTRACT PRODUCES A CASH CRISIS IN WEEK 10.

DAY 1

Contract signed. Switchgear order placed. Deposit paid: -$42,000 out of cash/LOC immediately.

WEEK 2

Mobilize. Temporary power, site setup. Overhead begins: -$8,000/week.

WEEK 3

Underground conduit order: conduit, fittings, boxes. -$18,000 material deposit.

WEEK 4

First pay app submitted. GC billing cut-off was week 3. Next cut-off is week 7.

WEEK 8

Second pay app submitted. Still no checks received. Cash deployed so far: -$114,000+

WEEK 10

First check arrives — pay app #1 collected. +$48,000 received. LOC still drawn for the balance.

WEEK 14

Switchgear arrives. Balance due on delivery: -$54,000 more. Gear is on site — cannot be billed until installed in week 18.

The gap: By week 14, you have spent $166,000+ on a contract where you have collected $48,000. The $118,000 gap is funded by the LOC. On a contractor with a $250,000 LOC and two other active projects, this one project can max the line before installation even begins.

THE THREE FIXES

HOW TO FUND THE BUYOUT WITHOUT MAXING YOUR LINE OF CREDIT.

FIX 01 — BEST OPTION

Stored Materials Billing in the SOV

Negotiate a stored materials line item in the SOV at contract signing. A switchgear stored materials line at the full gear value — billed when the deposit is paid and documentation is submitted — recovers the deposit cost before installation. Requirements: materials submittal, proof of purchase, lien waiver, certificate of insurance. Most GCs approve stored materials billing with proper documentation. This eliminates the LOC requirement for the gear entirely.

FIX 02

Negotiate a Mobilization Line That Covers Procurement Deposits

If stored materials billing is not available, negotiate a mobilization line weighted at 8–10% of contract value — explicitly covering equipment mobilization, site setup, and initial procurement deposits. On a $480K contract, 9% mobilization is $43,200. That covers the switchgear deposit. Bill it at contract mobilization date. It will not cover the balance due on delivery but it reduces the LOC requirement for the largest single outflow.

FIX 03

Size the LOC to the Electrical Buyout Before Signing

Before signing any electrical subcontract with major gear procurement, calculate the peak LOC draw: switchgear deposit + conduit and wire order deposits + weeks of overhead until first payment. That number is the minimum available LOC required to fund the project without a cash crisis. If your current LOC availability is below that number, either increase the LOC before mobilization or negotiate stored materials billing before signing. Do not discover the shortfall in week 8.

COMMON QUESTIONS

FREQUENTLY ASKED.

How long is the typical switchgear lead time on commercial projects?

It varies by manufacturer and project specifications. Standard commercial switchgear from major manufacturers is 14–20 weeks in normal conditions. Custom or specialty gear can run 22–28 weeks. Medium voltage switchgear for larger commercial or industrial projects is typically 20–30 weeks. Get the lead time confirmed in writing from the supplier before signing the subcontract — because the lead time determines your mobilization cash requirement and your stored materials billing window.

What documentation does the GC need to approve stored materials billing?

Standard package: a materials submittal identifying the specific equipment, manufacturer, and job number; proof of purchase (purchase order or supplier invoice); evidence of secure storage (warehouse receipt or on-site storage confirmation); a conditional lien waiver covering the stored materials; and a certificate of insurance naming the GC and owner as additional insureds for the stored material value. Some GCs also require a joint check agreement — they pay the supplier directly rather than paying you and trusting you to pay the supplier. That is their right and not worth fighting.

Does CFOS track material buyout timing in the cash forecast?

Yes. For electrical contractors, the 13-week cash forecast maps major material orders to their deposit payment dates, delivery dates, and billing dates explicitly — not as a single "material cost" line. Switchgear deposit in week 1, conduit order in week 3, gear balance due on delivery in week 14, stored materials billing receipt in week 6 — each one is a specific line on the weekly forecast. That level of detail is what prevents the week-14 cash crisis from being a surprise.

Josh Luebker

Fractional CFO · The Construction CFO

Former commercial construction project manager and master electrician. Managed 150+ projects totaling $300M+. Now fractional CFO for commercial subcontractors doing $1M–$12M. About Josh → | LinkedIn →

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