It rarely starts as a big problem. A business credit card to cover materials. A quick online loan to get through a slow month. A payment plan with the ATO. A supplier account that slips past 60 days. A year later you’ve got five debts, five due dates and repayments coming out of the account almost every day. Debt consolidation for tradies and builders is about pulling all of that into one loan so you can see the road again.
What debts can tradies and builders consolidate?
Any business debt, as long as you can get a payout figure. The most common ones are:
- ATO debts: overdue BAS, PAYG withholding, income tax, or a payment plan that’s getting hard to keep up with
- Business credit cards that have become a permanent overdraft
- Supplier trade accounts that are overdue or on stop
- Unsecured business loans with daily or weekly repayments
- Equipment and vehicle loans where the repayments are squeezing cash flow
- Private loans from family or business partners who want their money back
Consolidation is for business debts. Personal debts need to be looked at separately.
Why daily and weekly repayments hurt so much
Plenty of tradies take out a fast unsecured loan to solve one problem, then another to solve the next. Each one comes with its own daily or weekly debit. On their own they look manageable. Stacked together, they can swallow most of your incoming cash before wages and materials are paid.
When the repayments are coming out faster than the progress claims come in, it’s time to reset. Rolling them into one loan with one repayment schedule gives you breathing space to run the business, not just service the debt.
How a consolidation loan works
- List every debt. Lender, balance, repayment and whether there are any break costs.
- Get payout figures. Your lending specialist will help you pull these together.
- Offer security. Equity in a home, investment property, commercial property or land that you or a guarantor already own. A fast second mortgage is the most common structure, or a fast first mortgage if the property is debt free.
- Settle and pay out. At settlement, the new loan pays each creditor directly, and the old accounts are closed.
- Run the plan. One loan, one term, one exit.
No financials are needed for property secured loans, and bad credit is considered.
You need an exit plan
Here’s the honest part. Our consolidation loans are short term, typically 1 to 12 months. That makes them a reset, not a forever loan. Before you sign, know how you’ll repay:
- Refinance to a longer term lender once the tax debt is cleared, your file is cleaner and your returns are lodged
- Sell an investment property, land or equipment you no longer need
- Trade out from a big contract or a property settlement already on the way
If none of those are realistic, consolidation may just move the problem. Our guide to the exit strategy on a short term loan helps you test the plan, and your accountant is a good sounding board too.
Example: a small builder with five debts
Hypothetical example only.
A small builder in Toowoomba has an overdue BAS debt, two business credit cards at their limit, a supplier account on stop and two online business loans taking payments out every weekday. His business is profitable on paper, but most of each progress claim disappears into repayments.
He owns his home with a modest mortgage and a lot of equity. He takes a second mortgage that pays out all five debts directly at settlement. His supplier account reopens, the daily debits stop, and the ATO is paid. Over the next nine months he gets his accounts up to date and refinances to a longer term loan with a mainstream lender.
When consolidation doesn’t make sense
- The business is losing money. Consolidating losses just delays the reckoning. Talk to your accountant first.
- The debts are small and cheap. If it’s one card and a supplier account, a smaller cash flow loan may be enough.
- There’s no equity and no exit. A short term loan without a way out isn’t a solution.
If an ATO debt is the main issue, look at ATO debt loans for tradies as well. Our guide on using home equity for business explains what to think about before borrowing against your home.
Key facts: debt consolidation for tradies
- Loan size: $20,000 to $5 million
- Security: Existing property equity (home, investment property, commercial property or land)
- Debts: ATO, BAS, cards, supplier accounts, unsecured business loans, equipment loans
- Speed: As little as 24 hours in some cases; typically a few days once payouts and valuation are in
- Term: Typically 1 to 12 months
- Financials: Not needed; bad credit considered
Mistakes to avoid
- Leaving a debt off the list. One forgotten daily debit can undo the plan.
- Running the cards back up. Close or cut the limits once they’re paid out.
- Taking a new online loan the week after. That’s how the cycle starts again.
- Not fixing the cause. Tighten quoting, invoicing and claim follow up so the debt doesn’t rebuild.
Clear the decks
One loan and one plan beats five debts and a knot in your stomach. Start your application in about 60 seconds. Enquiring won’t affect your credit score, and we’ll tell you quickly if we can help.
