When the builder collapses halfway through the build

What happened

Paul tells the story of a client in Tasmania building a very large indoor equestrian centre. Halfway through, the building company collapsed and the builder was gone. The owner was left with a half-finished structure, no cash to finish it, and a deadline that mattered: buyers were lined up for the rainwater the huge roof would collect, and that contract would fall over if the building was not completed. The banks declined it as too unusual and too risky. Paul flew to Burnie the same day, walked through the half-built barn, and the funds were in the client's account the next afternoon. The centre was finished and the water contract went ahead.

Why the banks walked away

A partly built project is hard for a bank. Until it is finished the building is worth less than its cost, a failed builder adds uncertainty about defects and missing work, and a specialised building is one a bank cannot easily price or resell. Each of those reads as risk, and together they usually mean a decline or a long wait. A lender that looks at the equity in property and at what completion unlocks can reach a different answer.

First steps if your builder has gone under

1. Find out who is in charge now. An administrator or liquidator controls the builder's affairs. Contact them about the contract, materials on site and any money held.
2. Secure the site and record it. Photograph what has been built, list materials on site, and keep every invoice and payment record.
3. Get a price to complete. A replacement builder's quote, fixed if possible. The gap between that and what is left in the budget is the amount that has to be found.
4. Check for insurance. For a home, a home warranty or domestic building insurance policy may respond. Commercial and investment projects rarely have an equivalent.
5. Name the exit. A sale, a lease, a contract that starts on completion, or a bank refinance once the building is finished and easier to value.

How funding to finish works

The loan is secured on Australian real property: the project itself if there is enough equity in it, or another property such as the owner's home or an investment property, up to 80% of residential value or 70% of commercial value, less what is owed. There are no financial statements to produce. The term is open, so the loan runs until the building is finished and the exit arrives, and it can be repaid then without a penalty. The written guide to business bridging loans covers this kind of bridge, from a gap you can see the end of to the money that closes it.