For many General Contractors, early pay programs start with a simple assumption: “We’ll fund it ourselves.”
At first, that makes sense. A self-funded program can increase margins, earn higher yields on cash, strengthen subcontractor relationships, and create a competitive advantage in the market. But one reality often gets overlooked: A company’s cash position is never static. The same GC with excess liquidity this year may have very different priorities next year. Sound familiar?
The list of initiatives a GC is running at any given time is staggering:
- Hiring
- Geographic expansion
- Technology investments
- Equipment purchases
- Stock redemptions
- Debt servicing
- ESOP funding obligations
- Acquisitions
- Bonuses
- Economic slowdowns
- Rising backlog risk
- Delayed owner payments
- Preserving liquidity during uncertainty
All of these can put pressure on available cash. When that happens, many internally funded early pay programs face a difficult choice:
- Pull capital away from other strategic priorities to sustain the program
- Scale the program back
- Pause the program entirely
The challenge is that once an early pay program gains traction, pulling back has consequences beyond the balance sheet. Subcontractors begin to rely on predictable access to cash. Internal teams spend months driving adoption, educating suppliers, and integrating operational processes. Participation grows. Relationships strengthen. The program becomes part of how the business operates.
Reducing access or shutting the program down doesn’t just impact returns — it can make rebuilding trust and adoption in the program difficult.
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The limitation of GC-funded only programs
One of the most common constraints in the market today is not a lack of subcontractor demand, but rather, limited year-to-year capital availability from the GC. Recently, we spoke with a $2.5B GC evaluating an early pay strategy. The program’s economics were compelling, but internal cash constraints limited the capital they could deploy.
The result:
- They could only support roughly one-third of subcontractor demand
- The program was projected to generate approximately $1.7M in annual returns
- They were leaving an estimated $3.1M in additional returns on the table because the program had no third-party funding options
That’s the hidden issue with self-funded-only models: your adoption is limited by your available cash. Even if subcontractors want the program, even if the returns justify expansion, and even if the operational model works, growth stops when capital runs out.
How third-party funding changes the equation
Third-party funding allows GCs to scale beyond their internal cash position. In this structure, a funding provider pays subcontractors early using the provider’s capital. The GC continues to pay invoices on their original due dates and receives a rebate for each transaction.
In the example above, third-party funding transformed the program from: $1.7M in projected annual returns TO $4.9M in projected annual returns
Without requiring the GC to materially increase internal capital deployment. And the challenge only becomes more significant when working with larger GCs. For some organizations, the capital required to fully support subcontractor adoption across the business can exceed $200M.
At that scale, limiting a program solely to available internal cash can unnecessarily cap participation, subcontractor impact, and the program’s overall financial return. Just as importantly, third-party funding solves several operational and financial concerns that often slow adoption.
Things to consider:
1. This is not debt
One of the biggest misconceptions around third-party funding is that the GC is borrowing money. That’s not what’s happening.
The funding provider is not lending money to the GC. They sign no agreements with the GC. Instead, they are purchasing the payment obligation tied to approved invoices and assuming the GC’s payment risk. Third-party funding can be sourced through Billd’s established capital network or a GC’s existing banking relationships, which may already be interested in supporting early pay solutions.
The GC’s obligation remains the same: pay approved invoices on the agreed due date.
- No loan on the balance sheet
- No borrowing base
- No need for the GC to deploy internal liquidity to accelerate payments
2. No administrative burden of accelerated payments
In many self-funded structures, AP teams must process and release payments earlier than their normal workflow requires.
That creates operational pressure:
- Pressure to approve invoices more quickly and consistently
- Managing and processing early payment requests in tight timeframes
- Faster payment processing requirements
- Increased internal cash management and oversight
With third-party funding, the provider handles the accelerated payment to the subcontractor while the GC maintains its standard payment process and timing. Operationally, the program becomes far easier to sustain and scale.
3. No invoice value adjustments
Another common concern among GCs is whether reducing subcontractor invoice values creates owner-facing complications.
Some organizations worry: “If we pay less than the invoice amount because of a discount, could the owner try to claim that discount as well?”
In a third-party funded structure, invoice values remain unchanged. The subcontractor receives accelerated payment from the funding provider, the GC pays the original approved invoice amount on the due date, and there are no owner-facing invoice discrepancies to reconcile.
That simplicity matters operationally, contractually, and from a risk management perspective.
Why flexibility matters
The reality is that funding needs to evolve. A GC may want to self-fund aggressively during one phase of the business and preserve liquidity during another. Capital priorities change over time. That’s why funding flexibility matters more than choosing a single permanent structure.
Billd is uniquely positioned in the market because we support:
- Fully GC-funded programs
- Fully third-party funded programs with Billd’s pool of funders or leveraging the GC’s bank partners who may be interested in this solution
- Hybrid structures that combine both
That hybrid approach allows GCs to deploy internal capital where it makes sense while leveraging third-party funding to meet subcontractor demand beyond internal cash capacity.
As business conditions change, the funding mix can evolve with them. The goal should never be: “We can’t launch because our cash position may change.”
The goal should be: “How do we structure a program that can adapt, scale, and continue generating returns as our business evolves?”
With the right funding model, early pay programs don’t have to compete with other strategic priorities. They can scale with subcontractor demand, adapt to changing business conditions, and continue generating meaningful returns for the GC over the long term.
To find out how Billd’s Predictable Pay Program makes it possible for GCs, contact us.
