Finance for construction subcontractors: plant, mobilisation and progress payments

What construction subcontractor finance typically covers

Construction subcontractors operate on a payment cycle that creates unique and persistent cash flow pressure. Progress claims are submitted monthly or at milestone points, but approved amounts can take 30, 60 or even 90 days to reach the bank account. Meanwhile, materials, labour, subcontractor payments, plant hire and insurance are all due earlier.

Retention holdbacks: typically 5% to 10% of each progress claim: are withheld until practical completion and the defects liability period ends, which can be 12 months or more. A subcontractor completing $2 million in contracts per year may have $100,000 to $200,000 locked in retention at any time.

The main funding types subcontractors compare:

Equipment and plant finance: for excavators, loaders, bobcats, skid steers, scaffolding, formwork, concrete pumps, cranes, tipper trucks, dump trucks and other heavy assets. Rates from 7.49% p.a. Typically structured as chattel mortgage, hire purchase or finance lease.

Invoice finance / progress claim finance: advances cash against unpaid progress claims. Unlike general invoice finance, progress claim financing is designed for construction payment schedules. The lender assesses the contract, the head contractor's creditworthiness and the claim validity. Rates from 2.5% of claim amount.

Working capital for mobilisation: short-term funding to cover pre-start costs: plant hire, temporary fencing, traffic control, materials, labour, insurance and compliance costs before the first progress payment is approved.

Unsecured business loans: may suit smaller, urgent funding needs or subcontractors who do not want asset security. Rates from 14.45% p.a. Terms tend to be shorter.

Retention replacement facilities: some lenders offer facilities that replace the working capital absorbed by retention holdbacks. Not borrowing against retention directly, but providing a buffer so the business is not squeezed by withheld amounts.

Performance bonds and bank guarantees: bonds are commitments backed by a bank or insurer, not a cash loan. They consume facility limits and can affect borrowing headroom at mobilisation, but may be required for larger contracts.

The funding-fit question for subcontractors is usually: is the gap caused by asset purchase, slow progress claims, retention, mobilisation costs, or a combination?

Common funding scenarios for construction subcontractors

Construction subcontractors deal with multiple overlapping cash pressures. Below are common scenarios and likely funding fits.

Scenario 1: Buying or replacing an excavator or loader

An earthmover's loader is due for replacement. The new machine costs $180,000. Paying cash would empty the working capital account.

Likely fit: Equipment finance via chattel mortgage. Rates from 7.49% p.a. Term of 3, 7 years matched to expected working life. GST can be claimed upfront on the BAS. Balloon payment optional.

Scenario 2: Bridging progress payment gaps

A concreter has submitted a $65,000 progress claim on a commercial project. The head contractor pays on 45-day terms. Meanwhile, the concrete supplier invoice is due in 14 days and the crew must be paid weekly.

Likely fit: Progress claim finance or invoice finance. Advance up to 80% of approved claims within 24, 48 hours. From 2.5% of claim amount. The facility can be used across multiple projects.

Scenario 3: Mobilising for a new civil project

A scaffolding contractor wins a $400,000 contract for a new commercial build. Pre-start costs include plant hire, transport, site-specific training, traffic control, insurance and compliance: all before the first progress payment.

Likely fit: Short-term working capital loan or line of credit. Draw at mobilisation, repay as progress claims are approved and paid. A line of credit provides flexibility if mobilisation costs vary or the first claim is delayed.

Scenario 4: Retention capital locked up

A formworker has $150,000 in retention held across three completed and two active projects. The money will be released progressively over the next 6 to 18 months but the business needs that working capital now to take on another project.

Likely fit: Working capital loan or retention replacement facility. Not a loan secured by retention, but a facility sized to replace the cash that retention holdbacks remove from the business.

Scenario 5: Performance bond required for a tender

A civil subcontractor is tendering for a council road project that requires a 10% performance bond. The bond consumes facility headroom at the same time mobilisation costs ramp up.

Likely fit: Business line of credit for mobilisation, combined with a bond facility from a specialist lender. Separating operating cash needs from bond requirements is cleaner than trying to fund both from the same facility.

Lender types that suit construction subcontractors

Construction subcontractors are often assessed more strictly than other industries because the sector has higher insolvency rates and complex payment chains. The right lender type depends on the funding need.

Specialist asset and plant lenders: understand residual values for excavators, loaders, cranes, scaffolding and earthmoving equipment. They focus on the asset rather than the contractor's full financial history. Rates from 7.49% p.a.

Progress claim and invoice finance providers: specialised debtor finance for construction. They assess the contract, the payment schedule, the head contractor's credit quality and the validity of claims. Some will not fund contracts with certain clauses (liquidated damages, lump sum payments, non-assignment clauses). Rates from 2.5%.

Non-bank cash flow lenders: assess recent bank statements, revenue and contract pipeline. Can provide working capital and lines of credit faster than banks. Rates from 14.45% p.a. for unsecured facilities.

Private and caveat lenders: for urgent needs ($100,000+ within days), property-backed lending may be an option. Typically short-term and higher cost. Useful for emergency equipment replacement or auction purchases.

Bond and guarantee specialists: lenders who understand performance bonds, bank guarantees and tender bonds. They assess the contractor's trading strength, job pipeline and ability to perform, not just the bond amount.

Major banks: competitive rates for established subcontractors with strong financials, property security and clean credit. Slower process and more documentation. Best suited to larger, well-established civil contractors.

Construction-specialist brokers: some brokers specialise in construction finance and can navigate the complex mix of asset finance, progress claims, bonds and working capital across multiple lenders.

What lenders look at for subcontractor applications

Construction subcontractors face more detailed scrutiny because lenders know the industry's payment risks.

Contract quality and payment terms: lenders look at the head contractor or developer: are they creditworthy? What are the payment terms? Are progress claims subject to dispute or offset clauses? A contract with a Tier 1 builder is assessed differently from a smaller developer.

Retention exposure: lenders note how much working capital is tied up in retention across current and completed projects. High retention relative to turnover can affect borrowing capacity.

Bank statement conduct: regular deposits from progress claims, consistent revenue patterns and clear separation of business and personal accounts strengthen applications. Gaps between claim deposits can indicate slow payment cycles.

Asset values and condition: for plant and equipment finance, the asset's age, condition, market value and expected working life are assessed. Specialist plant retains value differently from general vehicles.

Mobilisation cost clarity: lenders who understand construction will ask how mobilisation is funded. Applicants who can show a clear mobilisation plan (pre-start costs, timeline, first claim date) present a stronger case.

Credit history: personal and business credit files are checked. Defaults from disputed progress claims or builder collapses may need explanation.

Pipeline visibility: lenders like to see what projects are current, what is in the pipeline and whether the business is overly reliant on one client or one project.

GST and BAS history: GST registration is typically required for secured asset finance. Consistent BAS lodgement demonstrates compliance and revenue visibility.

Documents and readiness: what to prepare

Construction subcontractor applications benefit from structured, project-level documentation. The more clearly the contract and cash flow can be presented, the faster the assessment.

Business and contractor details

- ABN, ACN (if applicable)

- Director identification

- GST registration

- Relevant licences and accreditations

Financial evidence

- 3 to 6 months of business bank statements

- BAS statements (last 2 to 4 quarters)

- Tax returns or financial statements for larger facilities

- Profit and loss by project (if available)

Contract and project information

- Signed contracts or purchase orders for current projects

- Progress claim schedule and payment terms

- Details of head contractor(s) and their payment history

- Retention amounts held and expected release dates

- Pipeline of upcoming projects

Asset information

- Quote or invoice for plant, equipment or vehicles

- Serial numbers, age, condition and supplier details

- Service history for used equipment

- Existing equipment finance commitments

Mobilisation plan

- Pre-start cost breakdown (plant hire, materials, labour, compliance)

- Expected timeline to first progress claim

- Insurance and bond details where applicable

A well-organised application that tells a clear project story is more likely to receive a fast, favourable assessment.

Rates, costs and what to watch

Construction subcontractor finance rates vary by product and project profile. Below are indicative starting ranges.

Costs beyond the rate:

- Establishment fees

- Monthly account or line fees

- Progress claim finance fees (service fee, discount fee)

- Balloon or residual on equipment finance

- Early payout fees

- Late payment and default charges

- Bond facility fees (establishment, annual, drawdown)

What to watch:

- Progress claim finance fees accumulate the longer a claim remains unpaid. Faster-paying head contractors mean lower costs.

- Equipment finance for used plant may require a valuation and shorter terms. Check age limits with the lender.

- Retention is not lendable directly, but a working capital facility sized to replace retained cash can free up growth capacity.

- Do not use short-term working capital to buy long-term assets. Match the facility term to the need.

- Contracts with liquidated damages, lump-sum payment or non-assignment clauses may be excluded from progress claim finance. Check before applying.

Next steps: comparing funding fit

The first step is the funding-fit check, especially for subcontractors managing multiple overlapping gaps.

Use the funding-fit check to clarify:

- Is the need for a specific plant or equipment asset?

- Is the need for bridging unpaid progress claims?

- Is the need for mobilisation cash to start a new project?

- Is retention locking up working capital that could fund growth?

- Is a performance bond required for an upcoming tender?

- What contracts, claims and financial documents can support the application?

- What repayment amount fits within the current project pipeline?

Once the funding path is clear, compare lenders who understand construction cash flow. Avoid generic business loan applications that do not account for progress claim timing and retention.

Compare One's relevant guides:

- Equipment finance guide

- Invoice finance guide

- Working capital guide

- Business line of credit guide

- Unsecured business loans guide

The goal is one clear application to a lender who understands that construction payments do not arrive on the same schedule as other industries.