Author: Darren Tredgold, General Manager, Independent Steel Company
Construction trade credit keeps the Australian building industry moving. Yet construction trade credit sits in a blind spot that banks, fintechs, and policymakers all refuse to acknowledge.
I run a regional steel distribution business with branches across South-East NSW. Every week, we send steel out the door on 30-day terms. Payment shows up in 60 or 90 days. Sometimes it does not show up at all. That gap between delivery and payment? We fund it from our own pocket. So does every other independent building materials distributor in the country.
And nobody measures what that costs us.
Construction Trade Credit Funds 40% of Builder Liabilities
The Reserve Bank of Australia confirmed what distributors already knew from experience. The median builder carries roughly 40% of total liabilities as short-term unsecured trade credit. That figure runs about double the ratio for businesses in other sectors.
Think about what that means in practice. For every dollar a builder owes, forty cents sits on a supplier’s books as an unpaid invoice. There is no loan agreement. Interest never gets charged. A credit analyst never approved it. Instead, the distributor’s own cash flow absorbs the entire gap.
Across all Australian SMEs, construction trade credit totals an estimated $80 billion at any given time. If you combined that capital into a single institution, it would rank as the fifth largest bank in Australia by assets. Unlike banks, however, distributors carry this exposure with zero regulatory recognition and almost no legal protection.
Builders Keep Collapsing and Suppliers Keep Losing
Since mid-2022, more than 7,600 construction firms have entered external administration. That accounts for roughly 27% of all corporate insolvencies despite the sector making up less than 10% of GDP. On top of that, ASIC identifies inadequate cash flow as the primary driver in 52% of those failures.
The big collapses tell the story clearly. Porter Davis went down with $557 million in debts and left more than 1,000 subcontractors and suppliers sharing $481.6 million in unsecured claims. Probuild owed $250 million across 2,300 creditors. In both cases, secured lenders expected full recovery. Unsecured creditors, including material suppliers who provided the construction trade credit that built those projects, received nothing.
This pattern repeats with grinding consistency. More than 80% of construction insolvencies return zero cents in the dollar to unsecured creditors. Banks protect their positions through covenant monitoring and early warning systems. Meanwhile, suppliers keep delivering steel until the phone stops getting answered.
Why Fintech Platforms Miss the Biggest Risk
Australia’s construction fintech landscape has grown rapidly in recent years. Platforms like Payapps manage progress claims between head contractors and subcontractors. Similarly, invoice finance providers advance cash against formal invoices. Supply chain finance programs then let approved suppliers access early payment at better rates.
Here is the problem, though. Every one of these tools requires a formal, project-linked invoice sitting in an accounting system. Regional distributors do not operate that way. We maintain running accounts instead. A builder’s tab might include dozens of small transactions across multiple job sites, and none of those transactions connect to a specific progress claim.
As a result, construction trade credit from distributors falls through every gap in the supply chain finance ecosystem. No fintech platform in Australia aggregates or monitors how much credit building materials distributors collectively extend. For distributors exploring the broader landscape of B2B payment delays, the options remain frustratingly thin. Invoice finance platforms typically require minimum facility sizes of $50,000 to $100,000 and at least four regular debtors. Most regional distributors cannot qualify.
Legal Protections That Dissolve on Contact
Steel distributors theoretically have protections through the PPSR and retention of title clauses. In practice, both fail for building materials. Once steel gets poured into a slab or welded into a frame, it becomes a fixture. The Personal Property Securities Act does not cover fixtures. Your PPSR registration therefore becomes symbolic the moment your materials get installed.
Security of Payment legislation can help recover debts from solvent builders. But it turns irrelevant the moment a builder enters administration, because the statutory moratorium halts everything. Compare this with the United States, where mechanic’s liens attach directly to the property itself. Australian suppliers get no equivalent protection.
What the Industry Needs to Recognise
Regional distributors perform a function that neither banks nor fintechs can replicate. We provide real-time, relationship-based construction trade credit to builders who would otherwise struggle to access formal finance. We notice when ordering patterns shift, and we know when a builder starts asking for extended terms.
That ground-level intelligence has genuine economic value. Still, every builder insolvency that wipes out our receivables erodes our capacity to keep extending credit. Construction trade credit is not infinite. Each collapse makes the next round of lending harder for every surviving distributor.
Three things need to happen. First, someone needs to measure the total quantum of construction trade credit in this country. Second, trade credit risk management tools need to evolve beyond formal invoicing to account for how regional supply chains work. Third, policy frameworks need to recognise that distributors are financing construction, not just selling materials.
Until that happens, regional distributors will keep funding an industry that does not know we exist.
Darren Tredgold is the General Manager of Independent Steel Company, serving South-East NSW from branches in Queanbeyan, Nowra, and Moss Vale.