CALCULATOR · NET 30 THROUGH NET 120

WAITING TO BE PAID HAS A PRICE.

Pay-when-paid is working capital you lend him. Most subcontractors never price it and absorb it out of margin on every job.

BUDGETED PROJECT COST, $YOUR COST OF CAPITAL, % A YEAR

Labor, material, equipment and subs, before margin. Then your line of credit rate, or whatever really funds the wait.

YOUR FINANCING COST BY PAYMENT TERM

Enter who you are and an email and the table below fills in with your numbers. The same submission emails you the Overhead Calculator, because the financing cost belongs in the bid next to a correct overhead rate and one without the other still loses money. Free, and the figures you typed above aren't sent with it.

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Last 12 months revenue

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EVERY TERM, PRICED

SIX TERMS ON $500,000 OF COST.

At a 9 percent cost of capital, which is where most subcontractor credit lines are priced. Enter your own figures above and this table follows them.

Payment terms	Financing cost	% of cost	What to do with it
Net 30	$3,699	0.74%	Add it to the bid
Net 45	$5,548	1.11%	Price it in as cost
Net 60	$7,397	1.48%	Price it in as cost
Net 75	$9,247	1.85%	Price it in as cost
Net 90	$11,096	2.22%	Not negotiable
Net 120	$14,795	2.96%	Not negotiable

FINANCING COST = COST x RATE / 365 x DAYSADD IT BEFORE MARGIN, NOT INSTEAD OF IT

WHAT TO DO WITH THE NUMBER

A LINE ITEM OF ITS OWN SURVIVES A NEGOTIATION.

The figure is only worth having if it reaches the bid, and where you put it decides whether it survives the conversation that follows.

PUT IT IN AS COST, ABOVE MARGIN

Financing cost is cost recovery. Adding it inside your margin means the first request for a sharper number takes it back out, and neither you nor the estimator will notice which part went.

PRICE THE GENERAL CONTRACTOR, NOT THE CONTRACT

Keep a payment record by GC and use his real average rather than the term in the subcontract. It also turns a grievance into a negotiation: a general contractor whose payment behaviour is costing you two points can be shown the two points.

READ IT ACROSS THE WHOLE YEAR

One job's financing cost looks survivable. A subcontractor holding an average receivable at a nine percent cost of capital is paying that rate on the balance every year, and on a ten percent net margin business the revenue needed to replace it's ten times the number.

Working capital cost in bidsWhat the clause really saysDays in AR

$10.7M+

Client AR Recovered Since 2023

Active Trade Specializations

60 DAYS

Average Onboarding Time

COMMON QUESTIONS

PAY-WHEN-PAID, ANSWERED.

The general contractor pays you after the owner pays him. You're still owed the money and the clause is about timing rather than about whether the debt exists, but the wait can last 60 to 120 days and that wait has a financing cost. Pay-if-paid is the harder cousin: it says the GC owes nothing if the owner never pays at all, it's restricted in several states and void in some, and it's worth knowing which one your subcontract really says.

Project cost times the annual rate divided by 365, times the days to payment. On $500,000 of cost at 9 percent over 75 days that's $9,247, which is 1.85 percent of cost. Add it before margin rather than instead of margin: it's cost recovery, not profit, and a bid that treats it as profit gives it away the first time somebody asks for a sharper number.

How he really pays. The subcontract says Net 30 and the check turns up at day 85, and the math doesn't care which of those is written down. Keep a payment history by general contractor and price each one on his own record. That also gives you something to negotiate with, since a GC being told his payment behaviour costs two points has a specific number to respond to rather than a complaint.

No. Interest on a late payment is what you charge when somebody breaks the terms. This is the cost of the terms themselves being honoured. A GC who pays right on Net 90 has done nothing wrong and has still used your money for three months, and that's a cost of doing business with him that belongs in the price of doing business with him.

Use whatever your marginal cost of capital really is. For most subcontractors that's the line of credit rate because that's what funds the shortfall. If you're funding it out of retained cash instead, the honest figure is what that cash would otherwise earn or what it costs you to be unable to take the next job, and that second one is usually the bigger number.

No. The math happens in your browser and the figures are never sent anywhere. The form sends who you are and your email so the workbook can be sent to you, and nothing else.

Josh Luebker

FRACTIONAL CFO · SPM THE CONSTRUCTION CFO

Josh Luebker is a master electrician turned construction CFO, president of SPM The Construction CFO and author of CONTROL: C.F.O.S. Construction Financial Operating System.

About Josh | LinkedIn

WAITING TO BE PAID HAS A PRICE.

SIX TERMS ON $500,000 OF COST.

A LINE ITEM OF ITS OWN SURVIVES A NEGOTIATION.

PAY-WHEN-PAID, ANSWERED.

What does pay-when-paid mean for a subcontractor?

How much should I add to my bid for slow payment terms?

Should I price the contract terms or how the GC really pays?

Is this the same as a late payment penalty?

What if my line of credit rate isn't the right number to use?

Do you store what I enter?

IS THE FINANCING COST IN YOUR BIDS?