Lending Freeze Threatens to Crush Construction Industry, Builders Moving South

A longtime Manitoba construction business owner is sounding the alarm over a growing financial crisis that could wipe out small and mid-sized builders across Canada. The warning comes after more than 30 discussions with banks, credit unions, and private investors — all of whom have drastically pulled back on construction lending. Despite strong demand for housing and infrastructure, industry insiders say most builders can no longer access credit to keep projects moving.

The owner, who asked not to be named to protect their business, says lenders are now only willing to finance borrowers with near-perfect credit, long-term collateral, and predictable cash flow — a standard that doesn’t align with the realities of construction. “In this industry, everything is tied to projects and cash flow. If we can’t bridge the gaps between billing cycles, we’re dead in the water.”

While larger developers with deep pockets might survive the squeeze, small and mid-sized firms are rapidly losing options. Even formerly accessible secondary lenders and credit unions have backed away. The federal government quietly eliminated a CMHC-backed guaranteed credit line that once helped builders secure capital. The CEBA loan refinancing program was denied to many small contractors, leaving them with no safety net and, in some cases, in default. The result is a vacuum: no grants, no accessible lines of credit, and no path forward for businesses that once drove local employment and development.

The Sun was told of one Manitoba development — a shovel-ready, fully permitted, off-grid-capable residential subdivision with nine units under construction and strong presales. Utilities are in, permits secured, and one home is already occupied. Despite a total project value of $13.5 million, the company’s modest $32,500 line of credit remains frozen. “This should be a no-brainer. The homes are sold. The work is underway. But no lender will move,” the owner said.

The ripple effects go far beyond a single project. Construction accounts for more than 7% of Canada’s GDP and supports more than 1.5 million jobs nationwide, including about 50,000 in Manitoba. When builders can’t access capital, work stops. Tradespeople lose contracts. Municipalities see fewer permits and tax revenues. Housing supply shrinks, driving up costs. It’s a cycle that can quickly spiral into long-term damage. In rural Manitoba, some small business accounts are being “reviewed” or outright shut down by banks and credit unions, the owner says. “Debanking is happening here. This isn’t Toronto or Vancouver. This is small-town Manitoba.”

Some business owners are now seriously considering moving operations to Alberta or the United States, where lending conditions are more flexible and growth is still supported. Others are preparing to close shop. “My family has deep roots here. Our kids are in the trades. But we’ve had the conversation — should we sell and leave? It’s not an emotional reaction. It’s the math.”

While the federal government has focused on ambitious housing targets, experts say those numbers are meaningless without builders who can access financing. The Canadian Home

Builders’ Association has warned that falling housing starts, driven by financial pressure, will deepen the housing crisis and reduce affordability. Meanwhile, BuildForce Canada projects a shortage of skilled trades unless companies are able to invest in hiring and training, something that becomes impossible when credit is cut off.

The federal and provincial governments need to act now. The solution isn’t more bureaucracy or a temporary stimulus. What builders need is access to stable, non-predatory lines of credit that are designed for project-based businesses. Governments can restore guaranteed lending programs, establish low-interest credit pools through credit unions, or offer bridge financing for companies with active projects and valid permits. Even a modest government-backed lending facility targeted at viable small builders could prevent widespread failures. Regulatory pressure on small business credit must also be reviewed and adjusted in line with economic priorities.

Construction is not a side industry — it is the backbone of housing, infrastructure, and economic growth. And right now, that backbone is being fractured by silence and inaction. If governments at all levels don’t get ahead of this crisis now, they’ll be trying to rebuild an industry that no longer exists.