(4 min read)
A perfect storm of rising costs, labour shortages and high interest rates is resulting in an increasing amount of financial distress in the construction sector. What warning signs should lenders look out for? What are the implications under the loan agreement and how can lenders mitigate the risks of insolvent contractors?
We summarise key legal and practical considerations for lenders faced with distressed or insolvent contractors on construction projects they are financing and what they can expect from their borrowers in this scenario.
Signs of distress
Implications under the loan agreement
What can a lender expect in the event of contractor distress?
Mitigating risk in a contractor insolvency scenario
We expect to see an increasing number of contractor insolvencies in the coming months, however there are steps that can be taken to mitigate the risks to borrowers and lenders, both at contracting stage and when distress becomes apparent. If you are a lender or an employer needing help with an insolvent contractor on a project, please do reach out to our team.