Quick answer
Builders usually borrow to cover the gap between what a contract lets them collect and what a job costs before the next progress claim is paid. Banks lend to established builders with clean financials and property security. Non-bank lenders add progress payment finance, invoice finance, equipment finance and property-secured loans for builders who need speed or don't fit bank criteria. Structure matters, because licensing financial tests read your balance sheet.
Key points
- Statutory deposit caps mean builders often pay for materials and labour well before the first progress payment lands
- In Queensland, the QBCC's minimum financial requirements test your current ratio and net tangible assets, so loan structure affects your licence
- In NSW, icare's eligibility assessment for home building cover limits how many jobs you can run at once
- Progress payment finance, equipment finance and property-secured loans each solve a different builder problem
Most builders don’t borrow because the business is weak. They borrow because the rules of residential building put the cash outlay first and the payment second. A deposit is capped by law, the frame and roof go up on your account with suppliers, subbies want paying on Friday, and the base-stage claim can sit with the client’s lender for another fortnight. Multiply that across four or five jobs and a profitable builder can feel permanently short.
This page explains how lenders look at building companies, the state rules that shape a builder’s cash position, and which kinds of finance actually suit the work.
Why do builders run short of cash on profitable jobs?
The deposit is the first constraint. Every state limits what a builder can take up front on a domestic contract, and the limits are tight:
| State | Deposit rule on domestic work (as at October 2026) |
|---|---|
| Queensland | 5% where the contract price is $20,000 or above, with the home warranty premium paid out of that same 5% |
| Queensland | 10% for contracts between $3,301 and $19,999 |
| New South Wales | 10% of the contract price before work begins, with home building cover in place before any money is taken |
On a $600k home in Queensland, that’s $30k up front, part of it already spent on the warranty premium. Site set-up, slab, plumbing rough-in and frame materials can easily cost several times that before the first stage claim is due.
Then the claim itself takes time. Where the client has a construction home loan, their bank often wants an inspection before it releases funds. Issue a claim at the start of the month and the cash may not arrive until halfway through it, sometimes later. Meanwhile, supplier accounts on 30-day terms fall due, and a missed one can mean a stop-supply order on the next job.
That timing gap, not a lack of profit, is what most builder borrowing is really about. Our cash flow gap calculator shows how big your own gap gets when claims run late.
How do lenders view building companies?
Construction is one of the industries lenders watch most closely. Builder insolvencies get plenty of coverage, and a fixed-price contract can turn unprofitable fast when material costs rise or a job runs over. So expect questions.
Banks like established builders with two or more years of financials, a steady margin, low director debt and property to offer as security. If that’s you, take a bank offer seriously: it’s often the cheapest money available. Banks can still be cautious with fixed-price residential builders, large single-client exposure or anyone recently hit by a client default.
Non-bank and private lenders look at different evidence. They weigh recent bank statements, the signed contract book, who the clients are and whether there’s property equity in the background. They can move in days rather than weeks, which matters when a supplier is chasing you or a big job is starting.
What every lender wants to understand is your contract pipeline: the value of signed work, the stage each job is at, and how much is still to be claimed. A tidy work-in-progress schedule answers half the lender’s questions before they ask.
How do licensing rules affect a builder’s borrowing?
This is the part generic loan advice misses. In two of the biggest states, a regulator reads your balance sheet.
Queensland. QBCC licensees must meet minimum financial requirements, including a current ratio of at least 1:1 and net tangible assets of no less than $0, plus enough working capital to support turnover up to a set maximum revenue. Debt due within the next twelve months counts as a current liability. A short-term loan taken out to fund a job can therefore push your current ratio the wrong way, while a facility with a longer term may sit better on the balance sheet. Before signing, have your accountant model where the new loan lands in your MFR reporting.
New South Wales. Residential work over $20,000 needs Home Building Compensation Fund cover, and icare assesses a builder’s finances before issuing eligibility. That assessment sets limits on the value and number of projects you can have under construction at once. A builder who borrows to take on more work than their eligibility allows hasn’t solved anything, so check the cover limit before you fund growth.
Mid-page check: if your bank has already said no and a job is about to start, tell us about the contract. It’s roughly a sixty-second form, and asking carries no credit check.
What do builders typically borrow for?
- Working capital between claims. Covering materials, wages and subbies until the next stage payment clears.
- Funding a large contract. Mobilising for a job bigger than anything you’ve run before. Our page on funding a big contract you’ve just won covers this in detail.
- Plant and vehicles. Utes, tippers, excavators, scaffolding and site sheds.
- A tax bill. Builders with lumpy income often carry ATO debt after a big year. See ATO tax debt business loans.
- Buying land or a spec home site. Builders who develop on their own account move into construction and development finance.
Which loan types suit builders?
| Finance | Best for | Watch for |
|---|---|---|
| Progress payment finance | Bridging issued but unpaid stage claims | Lenders check the client and contract closely |
| Equipment finance | Machinery, utes and trucks, secured by the asset | Balloon payments at the end of the term |
| Business line of credit | Recurring gaps between claims | Limit reviews if turnover drops |
| Second mortgage or caveat loan | Fast, larger sums against property | Your property is on the line |
| Unsecured business loan | Quick, smaller amounts sized on turnover | Higher cost, shorter terms, often a director guarantee |
Whatever the product, line offers up by the dollars you’d hand over from drawdown to payout, not by the weekly repayment figure.
What risks and seasons do lenders weigh?
Lenders know the building calendar. The Christmas shutdown stops claims for two to three weeks while wages, leave loading and supplier accounts keep running. Wet seasons in Queensland and the north delay stages. Material price spikes squeeze fixed-price margins. Expect lenders to ask how you handled the last shutdown and whether recent contracts include rise-and-fall clauses.
Retention money held back on commercial jobs, disputes over variations and a single client making up most of your book all count against you. Spreading work across clients helps your application as much as it helps your business.
What documents should a builder prepare?
- Your two most recent sets of company accounts and tax returns, where they exist
- Bank statements for the main trading account, ideally covering six months or more
- A work-in-progress schedule: each job, contract value, amount claimed and amount still to claim
- Copies of major signed contracts and any recent progress claims
- Your builder’s licence details and, in Queensland, your latest MFR financial category
- ATO portal statement showing any tax debt and payment plan
- The address of any property that could back the loan, and what’s still owing on it
Worked example: a Queensland builder between stages
Hypothetical builder, made-up figures. A two-director building company in regional Queensland has three homes under construction worth $1.9m in total. A fourth contract for $720k is signed, with a 5% deposit of $36k. Slab and frame costs on the new job come to around $140k before the base and frame claims are paid, and one existing client’s lender is three weeks late on a frame claim of $95k.
The bank is happy with the business but wants six weeks to increase the overdraft. Instead, the directors use progress payment finance against the late claim, releasing most of the $95k within days, and take a modest equipment loan for a new tipper so they keep cash in the business. Their accountant confirms the arrangement keeps the current ratio above 1:1. Once the late claim settles, the advance is repaid and the bank review can proceed at its own pace.
Ready to get the next job funded?
Building rewards the people who keep jobs moving, and keeping them moving usually means having funding ready before the claim gap opens. We look at builder finance every week, including deals where the bank has passed or the timeline is too short to wait.
The online form is a one-minute job, and your credit score won’t move because you filled it in. Nobody forwards your file around the market either: one team keeps it, and a specialist who knows how construction cash flow works reads through the job and picks up the phone. Put in the true contract values, claim dates and any property you hold. Honest figures let us land on a workable structure at the first attempt.
Frequently asked questions
Can a builder get a business loan without two years of financials?
Often, yes. Banks generally want full financials, but non-bank lenders can assess recent bank statements, the contract pipeline and any property security instead. A newer building company with a strong signed contract and equity in property may have more options than it expects.
Will a business loan affect my QBCC minimum financial requirements?
It can. The MFR test looks at your current ratio and net tangible assets, and debt due within twelve months counts as a current liability. A longer term facility usually sits differently on the balance sheet from a short-term one, so ask your accountant to model the loan before you sign.
What is progress payment finance for builders?
It's funding advanced against a progress claim that has been issued but not yet paid. The lender pays you most of the claim value early and is repaid when the client or financier settles the claim, which smooths the wait between construction stages.
Can I use my home as security for a building business loan?
Yes. Many builders borrow against residential property they own, either through a second mortgage behind the existing home loan or a short caveat loan. It's often the quickest way to fund a large contract, though your home is then at risk if the business can't repay.
Do banks lend to builders?
Yes, and for an established builder with tidy accounts and good security, a bank is often the cheapest option available. Banks can be cautious with construction, especially fixed-price residential work, so a decline isn't unusual and doesn't mean other lenders will say no.
How quickly can a builder get funding?
Unsecured and invoice-based funding can be arranged within days when bank statements and claims are in order. Property-secured loans depend on valuation and title work, though short caveat loans can sometimes settle within a day or two.