Quick answer
A business loan doesn't automatically hurt your QBCC minimum financial requirements. Borrowed cash adds to assets and liabilities equally, so net tangible assets barely move. The current ratio depends on the loan's term: only repayments due within 12 months count as current liabilities, so a longer-term loan that clears tax or creditor debt can improve the 1:1 test, while a short facility can drag it toward the line.
Key points
- QBCC licensees must keep a current ratio of at least 1:1 and net tangible assets of at least $0, at all times.
- Borrowed cash and the matching debt mostly cancel out in net tangible assets; how you spend the money matters more.
- Loan term changes the current ratio: only the part due within 12 months counts as a current liability.
- Annual reporting for categories 1–7 is due by 31 December; company licensees in SC1 and SC2 report too.
- Lenders like a clean MFR report because it's an independent snapshot of a builder's balance sheet.
If you hold a QBCC contractor licence, borrowing raises a question most other businesses never have to think about: will this loan put my licence at risk? Short answer: a loan doesn’t break your minimum financial requirements (MFR) on its own. Net tangible assets hardly move when the money lands. The current ratio depends on when the loan is due and what you spend it on. Get those two things right and a loan can actually leave your MFR position stronger than it was.
With annual reports for most licensees due by 31 December, spring is when Queensland builders, plumbers, landscapers and other QBCC-licensed trades start looking at their 30 June numbers. If you’re thinking about finance in the next few months, here’s how a lender and the MFR tests each look at the same loan.
What do the QBCC minimum financial requirements actually test?
The QBCC’s minimum financial requirements come down to three tests, and they apply all year, not just on reporting day:
- Current ratio of at least 1:1. Current assets (cash, undisputed debtors and other things you’ll turn into cash within 12 months) must cover current liabilities (creditors, tax owing, credit cards and the part of loans due within 12 months).
- Net tangible assets (NTA) of at least $0. Total assets, minus liabilities, minus intangibles and “disallowed” assets.
- Enough NTA to support your maximum revenue. Your NTA decides how much revenue your licence allows. For example, the QBCC’s tables show $12,000 NTA for SC1 (revenue up to $200,000) and $46,000 for SC2 (up to $800,000). Categories 1 to 7 use a sliding scale.
The QBCC is strict about the maths. Its current ratio page says a ratio of 0.9987:1 “must not be rounded up”. A business that’s comfortably profitable can still fail on a bad 30 June balance sheet.
Does borrowing reduce my net tangible assets?
Mostly no. Picture the day a $100k loan settles:
- Cash goes up $100k (a tangible asset).
- Loan liability goes up $100k.
- NTA changes by roughly nil.
What moves NTA is what happens next:
| What you do with the money | Effect on NTA (broadly) |
|---|---|
| Buy a tipper, excavator or tools | Neutral at first: cash swaps for plant, then depreciation trims it over time |
| Pay off ATO debt or overdue creditors | Neutral: one liability swaps for another |
| Cover trading losses or overheads | Reduces NTA as the money is spent |
| Pay establishment fees and borrowing costs | Small reduction: the QBCC treats borrowing expenses as intangible |
| Buy goodwill (e.g. another business’s client base) | Reduces NTA: goodwill is excluded |
The QBCC’s NTA page also excludes things that can catch builders out. These include loans to related entities that don’t meet the regulation’s test, half of debtors over 180 days and all debtors over 365 days. Borrowing to chase old debts doesn’t fix those exclusions. Collecting them does.
How does a loan change my current ratio?
This is where the loan term matters most. When loan money is paid into your account, all of it counts as a current asset. Only the repayments due in the next 12 months count as a current liability. So:
- A longer-term loan (say, three to five years) adds more to current assets than to current liabilities. The ratio usually improves.
- A short facility repayable within 12 months adds roughly equal amounts to both sides. If you’re above 1:1, that drags you towards the line rather than away from it.
- Swapping current debt for longer debt is the strongest move. Clearing ATO debt, overdue suppliers or a maxed credit card with a loan that’s mostly due after 12 months takes current liabilities off the balance sheet.
A line of credit or overdraft that can be called in at short notice is often treated as current. Ask your accountant how they’ll classify any facility before you choose one. It’s a two-minute conversation that can save a nervous December.
Weighing up a term loan to tidy your balance sheet before 31 December? See what’s possible for your business. There’s no credit check when you first enquire.
A worked example: same loan, two structures
Illustrative only — the numbers are rounded and ignore interest and fees. A Brisbane residential builder trading as a company is in financial category 1. At 30 June the balance sheet shows:
- Current assets: $420k
- Current liabilities: $400k, including $90k owed to the ATO
- Current ratio: 1.05:1, which is uncomfortably close to the line
The builder borrows $120k, uses $90k to clear the ATO debt and keeps $30k in the bank for materials.
| Three-year term loan | 12-month facility | |
|---|---|---|
| Current assets | $450k | $450k |
| Current liabilities | $350k (only about $40k of the loan due within 12 months) | $430k (the whole $120k is current) |
| Current ratio | About 1.29:1 | About 1.05:1 |
| NTA | Roughly unchanged | Roughly unchanged |
Same money, same purpose, very different MFR picture. The term structure gives the builder breathing room on the 1:1 test, and the ATO is paid in full instead of hanging over the next report.
How lenders look at a QBCC-licensed business
Lenders don’t run the MFR tests for the QBCC, but they ask many of the same questions, and the MFR report gives them a head start. From a lender’s side of the desk, these are the things that count:
- Licence in good standing. A suspended or cancelled licence usually means income stops. Our guide to licences lenders check explains why.
- Maximum revenue headroom. If your pipeline would push you past your maximum revenue, a lender will want to know you’ve applied to lift it. If you’re already close, growth funding needs a plan for your NTA.
- Progress claim timing. Builders pay subbies and suppliers before claims are paid. Lenders look at your debtors, retentions and contract schedule. The builder business loan page covers this in detail.
- Tax position. ATO debt is common in construction and is considered case by case. A current BAS record, or a clear plan for the debt, helps.
- Director assets. Some company licensees rely on a deed of covenant and assurance from a director. If you plan to borrow against the same property, tell both your accountant and the lender early.
It’s the same lens whatever your trade: plumbers waiting on builder payment terms and landscapers with structural work under a QBCC licence face the same tests.
What should I sort before the 31 December report?
The QBCC annual reporting page says reports for financial categories 1 to 7 are due by 31 December. Lodgement opens from 1 August, usually on 30 June figures. QBCC guidance puts SC1 and SC2 company licensees on a 31 March deadline. Since March 2025, individual SC1 and SC2 licensees no longer have to lodge annual reports, but they must still meet the MFR at all times.
A practical spring checklist:
- Get your 30 June balance sheet from your accountant now, not in mid-December.
- Work out your current ratio and NTA, and how far above the line you sit.
- List every current liability. That means ATO, super, creditors, cards and the 12-month portion of each loan.
- Chase old debtors. Anything over 180 days is already costing you NTA.
- If you’re arranging finance, choose the structure with your accountant. Then the loan helps the next report instead of hurting it.
- Check your maximum revenue against the work you’ve signed for the year ahead.
If 30 June has already passed and the numbers were tight, remember the requirements apply at all times. Fixing the balance sheet now still matters for the rest of the year and for next June.
Common mistakes builders make with loans and MFR
Taking the fastest short-term money. It might solve this week’s payroll. But if the whole balance is due within a year, it can leave your current ratio worse than before.
Lending money out to related entities. Loans to family trusts or associated companies can be excluded from your assets. Borrowing so the company can lend it on often looks good to nobody.
Spending working capital on losses without a plan. Every dollar of loss reduces NTA. A loan that covers a loss-making job needs a clear way back to profit.
Leaving it until December. Accountants are flat out before the deadline. Finance takes time to arrange properly, so start the conversation while there’s still room to choose.
Building something? Let’s make the loan work for your licence too
We talk to licensed builders and trades who have exactly this question: “I need the money, but I can’t afford to upset the QBCC.” A loan with the right term, used for the right purpose, can strengthen both your cash position and your MFR. Getting it wrong can do the opposite.
Our enquiry takes about 60 seconds, and there’s no credit check when you first enquire. Your details aren’t sent to a pile of lenders, so your phone won’t light up with strangers while you’re on site. A real person who understands progress claims, retentions and QBCC licences will look at your situation and call you. Please fill in the form accurately, including any ATO debt and your rough current ratio if you know it. That way we can match the right option the first time.
Frequently asked questions
Does taking out a business loan reduce my QBCC net tangible assets?
Not on its own. When the money lands, cash goes up and a loan liability goes up by the same amount, so net tangible assets stay roughly where they were. Fees and borrowing costs don't count as tangible assets, and spending the money on losses or overheads reduces NTA over time. Buying equipment or clearing debts tends to leave NTA much the same.
Is a business loan a current liability for the QBCC current ratio?
Usually only the part you have to repay within the next 12 months is treated as current. A three-year term loan typically has a smaller current portion than a 12-month facility of the same size. Your accountant classifies each loan based on its actual terms, so have the loan contract handy.
Can I use a loan to pay off ATO debt and improve my current ratio?
It can help. Tax owed to the ATO is a current liability. Replacing it with a loan where most of the repayments fall beyond 12 months can lift your current ratio. The ATO debt still has to be dealt with properly, and lenders consider ATO debt case by case, so be upfront about the balance and any payment plan.
When is the QBCC annual MFR report due?
For most licensees in financial categories 1 to 7 it's due by 31 December, usually based on 30 June figures. QBCC guidance says SC1 and SC2 company licensees report by 31 March. Individual licensees in SC1 and SC2 no longer need to lodge annual reports but must still meet the requirements.
Will a lender ask for my QBCC MFR report?
Many will be glad to see it. The report shows your current ratio, net tangible assets and maximum revenue at a point in time, often checked by an accountant. It saves questions and shows you're keeping your licence in good order.
Can I borrow against my house without affecting my company's MFR?
A mortgage over a director's home sits outside the company's own balance sheet, but the loan money paid into the company and the company's obligations do show up. If the director has assured assets to the company under a deed of covenant and assurance, extra borrowing against those assets may change what can be assured. Check that with your accountant before you sign.