Quick answer
Construction and trade businesses usually need finance for three things: the gap between paying for labour and materials and receiving progress payments, equipment and vehicles, and tax obligations that pile up in busy periods. Lenders look closely at contract terms, payment history from head contractors, retentions and ATO lodgements. Lines of credit, invoice finance, equipment finance and property-secured loans are the common tools.
Key points
- Progress claims and retentions create long, uneven cash cycles.
- Equipment and vehicle finance is usually the easiest finance to obtain.
- Lenders watch for ATO debt, which is common in the sector.
- Contract terms and head contractor reliability affect how lenders see your income.
At a glance
- Typical needs
- Materials, wages, plant, utes, tax timing
- Common facilities
- Line of credit, invoice finance, equipment finance, secured loans
- Lender focus
- Contracts, payment history, ATO position, bank conduct
- Watch for
- Retentions, disputed claims and slow-paying builders
Construction runs on other people’s money for longer than almost any other industry. Labour, materials, plant hire and subcontractors are paid weekly, while progress claims are assessed, approved and paid on cycles that can stretch past a month, with retentions held back for even longer. Add a busy quarter’s GST and PAYG withholding and it is easy to see why so many profitable trade businesses still find themselves short of cash.
How money moves through a trade business
| Stage | Cash effect |
|---|---|
| Quoting and winning work | Little cost, but commitments begin |
| Mobilising | Materials, equipment hire and wages paid upfront |
| Progress claims | Submitted monthly or at milestones; paid on contract terms |
| Retentions | A share held back until practical completion or defects period ends |
| Final payment | Can be delayed by defects, variations or disputes |
The longer and larger the job, the deeper the gap. A sole-trader electrician on residential jobs may have a small, short gap; a commercial subcontractor on a large project can carry wages for many weeks before the first payment arrives.
Finance that fits the sector
- Lines of credit suit the recurring gap between paying out and claiming. Size the limit to your deepest point, not your average.
- Invoice finance can work for businesses invoicing reliable builders or commercial clients, though construction claims are not accepted by every provider.
- Equipment finance and business car loans fund utes, trucks, excavators and tools, with the asset as security.
- Secured business loans against property cover larger needs, such as funding a big project start or clearing tax debt.
What lenders look at closely
Lenders who understand construction ask about your contract types, who your head contractors are and how reliably they pay, whether you are carrying disputed claims, and how retentions affect your cash. They also look hard at the ATO position, because tax debt is common in the sector. Up-to-date BAS lodgements and a clear explanation of any balance go a long way. Bank statements showing steady deposits from multiple clients read better than lumpy income from one builder.
Common traps
- Funding losses on underquoted jobs. Finance can bridge timing, not a job that loses money.
- Using GST and PAYG as working capital. It comes due at the worst time; see our BAS cash planning guide.
- Relying on one head contractor. If they fail or pay late, so do you.
- Ignoring your state’s payment laws. Security of payment legislation can help you get paid faster.
An illustrative example
A made-up plastering business wins a commercial job worth several months of revenue. Wages and materials will run for six weeks before the first claim is paid, and the builder holds retentions. The owner maps the gap with the cash flow gap calculator, arranges a line of credit sized to the peak, and keeps GST in a separate account. When claims start arriving, the line is repaid and remains available for the next job.
Strengthening a trade business application
Lenders who see a lot of construction applications respond well to the same handful of things. Bring a schedule of current jobs with contract values, claim dates and who the head contractor is. Show your ATO position honestly, with BAS lodged and any payment plan documented. Provide bank statements for every business account, because jobs often pay into different places. And explain anything unusual, such as a large deposit from a final claim or a month where a builder paid late.
If you carry significant retentions, list them with expected release dates. A lender cannot count them as cash, but seeing them laid out shows you understand your own position, which builds confidence.
Getting finance for your trade business
If your business is busy but the bank balance does not reflect it, finance matched to your cash cycle can help. To explore options, make one enquiry. There is no credit check when you first enquire, a real person reviews it and your details go to one lending partner rather than a list. Tell us your trade, typical job size and how your clients pay. If an ATO balance is part of the picture, include it in your enquiry so the options suggested are realistic.
Frequently asked questions
Can subcontractors use invoice finance?
Some invoice finance providers fund subcontractor progress claims, although construction invoices can be harder to finance because of retentions, disputes and claim certification. Ask specifically whether construction receivables are accepted.
How do lenders treat retentions?
Retentions are usually treated as uncertain money until released, so lenders rarely count them as available cash. Track them carefully and include release dates in your cash flow forecast.
Is it easy for tradies to get equipment finance?
Equipment and vehicle finance are often the most accessible facilities for trade businesses because the asset secures the loan. Time trading, credit history and the asset's resale value still matter.
Can a builder with an ATO debt get finance?
Possibly. Lenders consider ATO debt case by case, looking at whether lodgements are current, whether a payment plan exists and how the business is trading. Property security widens the options.
What is security of payment legislation?
Each state has laws that give contractors and subcontractors a process to claim progress payments and resolve disputes quickly. Knowing your state's rules can help you get paid faster, reducing the need for finance.
Sources and further reading
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