Construction business loans for builders, subbies and trades the bank won't fund

Building is a cash flow business disguised as a construction business. The work might be profitable on paper, but every job starts with money going out: wages every Friday, materials on 30-day accounts if you’re lucky, plant hire, subcontractors and insurance. Money comes back in claims that are assessed, argued over, approved and paid weeks later, with a slice held back as retention. One late payment from a builder or client can push a solid business to the edge.

Why banks are wary of construction

Construction has a long record as one of the industries with the most company failures in ASIC’s insolvency data. Banks know this, so many apply tight policies: higher security requirements, lower limits, extra scrutiny of contracts and aged debtors, and sometimes a blanket reluctance to lend to subcontractors at all. Add in tax debt that often follows a bad job and a short trading history for newer builders, and declines are common.

The construction cash cycle

Stage	Cash out	Cash in
Mobilise	Deposits, plant hire, initial materials	Possibly a deposit
Build	Weekly wages, materials, subbies	Monthly progress claims, paid 15 to 30+ days after
Practical completion	Final trades, clean-up	Final claim, minus retention
Defects period	Callbacks and fixes	Retention released months later

The deeper you are into a big job, the more cash is tied up. Growing businesses taking on bigger jobs are especially exposed.

Finance that fits building and trades

• Line of credit. Covers wages and materials between claims, repaid as claims are paid. See business lines of credit.
• Invoice and claim funding. Advances against approved claims or invoices to creditworthy builders and clients. See invoice finance.
• Equipment finance. Excavators, bobcats, scaffolding, trucks and tools, secured on the asset. See equipment finance.
• Unsecured working capital. Typically $5,000 to $500,000, sized on turnover in your bank statements.
• Property-secured private loans. For larger needs, tax debt after a bad job, or urgent situations, from $20,000 to $5,000,000.

When someone up the chain doesn’t pay

Subcontractors in particular can be left badly out of pocket when a builder or developer collapses. If that’s happened to you:

1. Speak to a lawyer or adviser about your rights under your state’s security of payment laws, and lodge any claim with the liquidator if one has been appointed.
2. Work out exactly what’s owed to you, and what you owe to your own suppliers, staff and the ATO.
3. Talk to a lender early. A property-secured loan can cover the gap while you recover what you can, and many private lenders understand when the loss wasn’t your fault.

If tax has fallen behind as a result, our page on ATO debt explains how lenders treat it.

An illustrative example

A Sydney concreting subcontractor (illustrative only) was owed $160,000 when a mid-sized builder went into liquidation. The business still had three good jobs on, but wages and concrete supply accounts were due and the bank wouldn’t increase its overdraft. A private lender approved a $200,000 caveat loan over the owner’s investment property for nine months, settled within days. The business kept its crews working, finished the jobs, and refinanced the caveat loan into an equipment facility and a line of credit once two months of clean statements were on record.

Pricing finance into your jobs

Builders who use finance well tend to treat it as a job cost, not an afterthought. If a big commercial job will tie up cash for three months before the first claim is paid, the cost of funding that gap belongs in the tender price, alongside plant hire and insurance. A few practical habits:

• Before tendering, map the cash flow of the job week by week: what goes out, and when each claim is likely to be paid
• Ask for a deposit or mobilisation payment where the contract allows it
• Negotiate claim cycles where you can; fortnightly claims shrink the gap compared with monthly
• Check retention terms carefully, including when and how they’re released
• Line up your facility before you sign the contract, not when the first wage run bounces

Our cash gap calculator is a quick way to see how deep a particular job will push your balance.

Making a construction file easier to approve

• Keep a current schedule of jobs: client, contract value, claimed to date and expected payment dates
• Have your aged debtors and aged creditors reports ready
• Know your retentions: how much is held, by whom, and when it’s due
• Keep BAS lodged on time, even if you need a payment plan
• Separate equipment needs from working capital needs; they suit different products

If you also supply labour to other builders, see our page on labour hire finance.

Keep the job moving

If the bank won’t help your building or trade business, start a quick enquiry. There’s no credit check when you first enquire, your details won’t be sprayed around to every lender in the market, and a real person who understands progress claims and retentions will call you. Please be accurate about your contracts, debts and any tax owing on the form so we can match you to the right lender quickly. See if you qualify.