Builder finance is different from a construction loan. A construction loan is about one build. Builder finance is about the business behind all the builds: the wages, the ute, the supplier accounts, the deposit on the next block and the cash you need to keep three jobs moving while one client drags their feet on a progress payment. Loans for builders at our end of the market need to be quick, flexible and arranged by people who know how a building business actually runs.
What do small builders use builder finance for?
We see the same needs come up again and again:
- Wages and subbies when progress payments land late
- Materials for several jobs at once, or bulk buys at a better price
- Deposits and land for the next project, including spec homes
- Starting a new contract before the first payment comes in
- Clearing an ATO debt that’s building up interest and attention
- Equipment and vehicles, from a new ute to a small excavator
- Finishing a job where a client has stopped paying
A good builder finance loan covers the business need without tying you to one specific site.
Why is builder finance hard to get from a bank?
Building is a lumpy business. Income arrives in big chunks tied to stages, costs arrive every week, and one bad job can dent a year’s financials even when the business is sound. Banks tend to look backwards at tax returns and profit and loss statements. If those show a tough year, or the business is growing faster than its paperwork, the answer is often no, or a long wait.
Private lenders and specialist lenders look forward instead. What’s the security? What’s the money for? How will it be repaid? If those answers are solid, a past bump in the road is much less of a problem. Our guide on what to do when the bank said no to construction finance goes into more detail.
How are loans for builders secured?
There are two main routes.
Property secured. The loan is secured against equity in property you or a guarantor already own: your home, an investment property, your yard or factory, or land with equity. This gives the most borrowing power, doesn’t need financials, and considers bad credit. Most builders go this way, usually via a fast second mortgage behind their existing loan.
Unsecured. If the business has traded for six months or more with an ABN, an unsecured cash flow loan may work. It’s sized to turnover using your recent business bank statements, and some are approved and funded within hours. See cash flow loans for tradies for how it works.
We don’t lend on the value of a build once it’s finished, or against progress draws on your own project. The security has to exist today.
Key facts
- Loan size: $20,000 to $5 million
- Security: existing property equity, or unsecured for businesses trading 6+ months
- Speed: property loans as little as 24 hours in some cases, typically a few days
- Term: typically 1 to 12 months
- Paperwork: no financials for property secured loans
- Credit: bad credit considered
- Suits: small builders running one to a handful of jobs, owner builders building for business, trades moving into building
How builder finance fits different sized builders
These are illustrative examples only.
The one job builder. Example: a carpenter has moved into building and is doing their first custom home for a client. The deposit covered the slab, but frame and roof need paying before the next claim. A modest second mortgage over their home carries them through to lock-up.
The three job builder. Example: a builder in the Hunter Valley has three homes on the go at different stages. Two clients are paying on time, one isn’t. Rather than let one slow payer stall everything, they use a single loan secured on their investment property to keep all three sites moving, then repay it as the late claims are paid.
The builder with the next site lined up. Example: a builder wants to secure a corner block ideal for a duplex, but their cash is tied up in current jobs. A first mortgage over their unencumbered factory settles the land quickly. See land purchase finance for builders for more on this.
What does builder finance cost?
Every loan is priced on your circumstances, including the security, the size, the term and the exit. We don’t publish rate cards, because a builder with strong equity and a clear exit shouldn’t be quoted the same as someone in a very different spot. Our job is to find the sharpest rate available for your situation and lay out the full cost before you commit.
Mistakes builders make with finance
- Using the business account as a buffer. When one job’s deposit funds another job’s shortfall, it’s easy to lose track. A separate loan makes the numbers clearer.
- Borrowing per crisis. Three small loans in three months costs more time and effort than one properly sized loan.
- Waiting too long on a slow payer. The longer you carry a late client, the more it spreads to the rest of your jobs.
- No exit. Know how each loan gets repaid before you draw it.
Talk to someone who knows building
We only work with the building and construction industry, so there’s no need to explain what lock-up or practical completion means. Start your application in about 60 seconds. It won’t affect your credit score, and a lending specialist will call you back to go through your options.
