How to Know If Your Builder Is Financially Stable: 3 Essential Checks Before You Sign

April 7, 2025

Choosing a builder for your new home is one of the biggest decisions you’ll make—but how do you know if your builder is financially stable and trustworthy?

Unfortunately, stories of companies going into liquidation mid-build or failing to pay suppliers are all too common. As a home buyer, it’s critical to do some background checks to protect yourself from unexpected financial risks.

Based on industry experience, here are three simple and effective checks every buyer should do before signing a building contract in New Zealand.

1. Get a Credit Check on the Building Company

One of the quickest and most effective ways to assess a builder’s financial health is by ordering a credit check. This can reveal whether the company:

  • Pays its bills on time
  • Has overdue accounts
  • Is in default with creditors
  • Has a good track record with suppliers

There are several online services in New Zealand that offer business credit checks for around $50. Simply search for “NZ company credit check”, and you’ll find multiple platforms that provide up-to-date reports.

This is a small cost for potentially huge peace of mind.

2. Request a Solvency Letter from the Directors

A solvency letter is a written statement from the directors of the company confirming that:

  • The company is solvent
  • It is able to pay all its debts as they fall due
  • It is operating in a financially responsible manner

This letter adds a layer of accountability and shows that the company is open and transparent about its financial position. If a builder hesitates to provide this, it may be worth digging a little deeper.

You can also request basic financial information or ask whether they’ve had any significant financial restructuring or changes in recent years.

3. Search for Public Records and Online Reputation

Before making any commitment, take 10 minutes to Google the company name and the names of its directors or shareholders. Look out for:

  • Any reports of liquidation, voluntary administration, or receivership
  • News stories involving financial disputes or unpaid subcontractors
  • Online reviews or forums discussing poor financial practices
  • Directorship history—check if directors have been involved in failed companies in the past

This quick background check can reveal red flags that aren’t immediately obvious through advertising or sales pitches. Don’t just stop at the company name—research the people behind it too.

Why It Matters: Protecting Your Investment

Financial instability in a building company can lead to:

  • Construction delays or halts
  • Lost deposits or progress payments
  • Poor communication or disappearing site teams
  • Incomplete homes or legal disputes

When a builder is financially secure, it’s not just about them being able to finish your home—it also gives you confidence in their systems, team, and long-term support.

Final Thoughts: Do Your Due Diligence

Choosing a builder isn’t just about price or design—it’s about trust, reliability, and security. Before signing a contract, take the time to verify that your builder is financially sound. These three simple checks—credit reports, solvency letters, and online research—can protect you from unnecessary risk and give you confidence in your decision.

At Today Homes, we support transparency and accountability. If you’re planning to build and want to work with a builder that’s financially stable and proudly stands behind their work, get in touch—we’d love to show you how we do things differently.