Growth is where many small building companies get into trouble. Not because the jobs are bad, but because every new job soaks up cash before it pays any back. Working capital for construction companies is about funding that gap, so you can take on the work you’ve won without starving the business of cash along the way.
This page is for small builders and trade contractors: businesses running a handful of houses, a duplex or townhouse project, or a steady flow of commercial fitout and maintenance work.
Why growing builders run out of working capital
Picture your business going from two houses on the go to five. On paper, revenue more than doubles. In the bank account, it feels like things got worse. Here’s why:
- Costs come first. Deposits to suppliers, site setup, slab, frame and wages all hit before the first claim is paid.
- Claims come later. Monthly claims, approval time and payment terms push cash weeks behind the work.
- Retention builds up. A portion of each claim is held back, and across five jobs that adds up.
- Overheads step up. A second supervisor, another ute, a bigger yard.
- Variations lag. The extra work is done now; the money arrives when the variation is finally agreed.
More jobs means more money tied up in work in progress. That’s the working capital squeeze.
Map your working capital cycle
Before you borrow, sketch out how cash moves through a typical job:
- Day 0: Contract signed, deposit received (if any).
- Weeks 1 to 4: Site works and slab. Costs paid, first claim lodged at the end of the stage.
- Weeks 5 to 8: Frame and roof. First claim paid, second claim lodged.
- Weeks 9 to 16: Lock-up and fix out. Claims keep lagging the work.
- Completion: Final claim lodged. Retention held for the defects period.
Now layer your other jobs over the top. The low points, where the most cash is tied up, show you how much working capital you need and when.
How much working capital do you need?
Hypothetical example only, using round numbers.
Say you’re running four jobs, each costing around $40,000 a month in labour, materials and subbies, and clients pay about six weeks behind the work. At any given time you’re carrying roughly six weeks of costs across four jobs, which is around $240,000 tied up before you count retention or overheads. If your bank balance and overdraft can’t carry that, you need working capital funding, or you need to slow down.
Your accountant can help you refine the number. The point is to know it before you sign the next contract.
Working capital finance options
Unsecured cash flow loans. For construction companies with an ABN trading 6 months or more. Assessed on recent business bank statements, sized to turnover, and some funded within hours. They suit smaller or shorter gaps. Read more about cash flow loans for tradies.
Property secured loans. Borrow against equity in a home, investment property, commercial property or land you or a guarantor already own. Up to $5 million, no financials needed, bad credit considered, and funding in as little as 24 hours in some cases. Terms typically run 1 to 12 months. These suit larger gaps or a business stepping up a level.
Bridging loans. If your working capital is stuck in a property that’s about to sell or settle, business bridging loans release it early.
For gaps caused mainly by slow claims, also see progress payment gap finance.
Seasonal crunches: Christmas, wet weather and the new financial year
Working capital gets tested at the same times every year:
- Christmas shutdown. Wages and holiday pay go out, but sites close and claims slow for weeks. Our guide to Christmas shutdown cash flow for tradies helps you plan.
- Wet weather. Rain stops work, but it doesn’t stop overheads.
- Tax time. Income tax, BAS and super can all land close together.
Plan these in advance and a short working capital loan can smooth them out.
Example: a builder stepping up to townhouses
Hypothetical example only.
A small builder on the Gold Coast has been doing single homes and wins a contract to build four townhouses for a client. The job is bigger than anything he’s done, and his cash flow forecast shows a deep low point around frame stage.
He owns his home and a small investment unit. He takes a second mortgage over the unit to create a working capital buffer for the townhouse job, keeps his existing homes on track, and repays from the townhouse claims and a planned sale of the unit.
Use working capital well
- Fund growth, not losses. If a job is losing money, a loan won’t fix it.
- Don’t overcommit. Only take on what your working capital, borrowed or not, can carry.
- Claim on time. Faster claims shrink the gap.
- Know your exit. Short term loans need a clear repayment plan.
Key facts: working capital for construction companies
- Loan size: $20,000 to $5 million
- 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
- Use: Wages, subbies, materials, overheads, seasonal gaps, taking on larger jobs
- Suits: Small builders and trade contractors that are growing
Grow without the squeeze
If you’ve won the work, make sure you can carry it. Learn more about builder finance, or start your application in about 60 seconds. We’ll tell you quickly if we can help.
