Subbies carry the building industry. You turn up, do the work, buy the materials, pay your crew, and then wait. And wait. When the builder above you is slow, disputes a claim, or goes under, you’re the one left holding the bill. Subcontractor finance is designed for that position at the bottom of the payment chain.
Why do subbies get squeezed on cash flow?
The payment chain in construction runs downhill. The client pays the builder, the builder pays the subbies, and every link adds a delay:
- Long payment terms. 30, 45 or even 60 days from end of month is common on bigger jobs.
- Claim approvals. The site supervisor wants to check the work before the claim is signed off.
- Retention. A portion is held back until the job is finished and the defects period is over.
- Back charges. The builder deducts for delays, cleaning or rectification, sometimes without much warning.
- Builders under pressure. When a builder is struggling, subbies are often the last to be paid.
Meanwhile, your wages, super, fuel, materials and BAS are all due on time.
What does subcontractor finance cover?
Anything that keeps your business running while the money’s owed, as long as it’s for business purposes:
- Weekly wages and super for your team
- Materials for the next job, so you don’t have to turn work down
- Supplier and wholesaler accounts before they go on stop
- A BAS or ATO payment due while claims are outstanding
- Equipment repairs or a replacement ute
- Insurance renewals and licence costs
It can also help you say yes to work. Plenty of subbies turn down a bigger job because they can’t carry the wages and materials until the first claim is paid. With funding in place, you can take the job, grow your crew and build a better relationship with a good builder.
No property? Unsecured cash flow loans for subbies
Most subbies don’t want to put the house on the line for a timing problem. If you have an ABN and have been trading for 6 months or more, an unsecured cash flow loan is often the best fit. It’s assessed on recent business bank statements and sized to your turnover. Some are approved and funded within hours.
Got equity? Property secured loans
If the amount is bigger, or you’re carrying several builders’ worth of unpaid invoices, a loan secured against property you or a guarantor already own can go further. Your home, an investment property, commercial property or land with equity can all be used. No financials needed, bad credit considered, and funding in as little as 24 hours in some cases. Terms typically run 1 to 12 months.
Either way, the loan isn’t secured against your invoices or progress claims. The builder doesn’t need to know, and doesn’t need to sign anything.
When the builder above you goes under
It’s every subbie’s nightmare. A builder you’ve worked with for years enters administration or liquidation, owing you for weeks of work. Recovery can take months and you may only get part of it back.
In that situation, finance can buy you time to keep your crew together and move on to new work. Get proper advice about your claim from your accountant or lawyer, and don’t build your repayment plan around money you may never see. Our guide to construction insolvency in Australia covers what’s going on in the industry, and the guide to security of payment claims and cash flow explains how the payment process affects your cash.
Example: a plasterer waiting on two builders
Hypothetical example only.
A plastering business in Melbourne’s north has eight staff and works for two volume builders. Both run 45 day payment terms, and one has started paying late. The business is owed a large amount, but its wages and board supplier account are due this week.
The owner doesn’t want to use his home. His business has been trading for five years with steady turnover, so he takes an unsecured cash flow loan sized to his bank statements. Wages go out on time, the supplier account stays open, and he pays the loan down as the builders catch up. He also starts reviewing which builder deserves his crew’s time.
Protecting yourself for next time
Finance fixes today’s problem. A few habits reduce the next one:
- Invoice and claim on the day the work is done, not at the end of the month
- Chase overdue claims early and in writing
- Keep an eye on builders who start paying later and later
- Don’t let one builder become most of your turnover
- Build a buffer when times are good
Key facts: subcontractor finance
- Loan size: $20,000 to $5 million (property secured loans from $20,000)
- Security: Unsecured for businesses trading 6+ months, or existing property equity
- Speed: Some unsecured loans funded within hours; property loans in as little as 24 hours in some cases
- Term: Property secured loans typically 1 to 12 months
- Builder involvement: None; claims and invoices aren’t used as security
- Suits: Subbies in every trade, from sole traders to crews of 20
Keep your crew working
You did the work. You shouldn’t have to stop working while you wait to be paid. See if you qualify in about 60 seconds, or read more about progress payment gap finance. Find your trade on our trades page.
