Contractor field notes
Calculate the carrying cost of financing a construction project
When you finance materials or payroll before receiving customer payments, interest and fees reduce the job return. This tool models material and labor balances separately, each for its own financing duration, using simple interest plus fees.
Simple-interest carrying cost
Financed dollar-days = material cost × material days + labor cost × labor days. Interest = financed dollar-days × annual interest rate ÷ 100 ÷ 365. Total carrying cost = interest + fees.
Worked example
Finance $12,000 materials for 45 days and $8,000 labor for 45 days at 12% annual interest. Dollar-days are $12,000 × 45 + $8,000 × 45 = 900,000. Interest is 900,000 × 0.12 ÷ 365 = $295.89. With $100 fees, total carrying cost is $395.89. Each balance is assumed constant for its entered duration.
Common estimating pitfalls
- Actual lending terms may use a different day-count basis, compounding, or changing balances.
- Include fees that apply to the project; do not confuse APR with a complete fee breakdown.
Frequently asked questions
Does this calculate compounded loan interest?
No. It is a simple-interest estimate using a 365-day year and a constant financed amount.
How should I model partial customer payments?
A single balance does not model staged repayments. Estimate separate financing intervals for changing balances, or use a lender schedule.
Should carrying cost be included in the job estimate?
If your business expects to incur it, account for it in your cost and pricing plan without counting it twice elsewhere.