A general contractor’s working capital peg counted its statutory holdback as an ordinary receivable. Ten per cent of every contract does not behave like one.
Short answer
No — a construction holdback retained under provincial lien legislation is not an ordinary trade receivable or payable, and folding it unadjusted into a standard net-working-capital peg misstates the target’s true liquidity in both directions: the holdback owed TO the target is not collectible until the lien period expires, and the holdback the target must itself withhold FROM its subcontractors cannot be paid out early no matter how the peg is drawn.
Ontario’s Construction Act, R.S.O. 1990, c. C.30, s.22(1) provides: “Each payer upon a contract or subcontract under which a lien may arise shall retain a holdback equal to 10 per cent of the price of the services or materials as they are actually supplied under the contract or subcontract until all liens that may be claimed against the holdback...have expired or been satisfied, discharged or otherwise provided for under this Act.” Ontario then adds a SECOND, separate holdback at s.22(2): “Where the contract has been certified or declared to be substantially performed but services or materials remain to be supplied to complete the contract...a separate holdback equal to 10 per cent of the price of the remaining services or materials as they are actually supplied under the contract or subcontract.”
British Columbia has only ONE holdback pool, not two. Its Builders Lien Act, S.B.C. 1997, c. 45, s.4(1) requires that “The person primarily liable on each contract, and the person primarily liable on each subcontract, under which a lien may arise under this Act must retain a holdback equal to 10% of the greater of (a) the value of the work or material as they are actually provided under the contract or subcontract, and (b) the amount of any payment made on account of the contract or subcontract price” — there is no British Columbia equivalent to Ontario’s separate s.22(2) finishing holdback. A working-capital model carried over from an Ontario deal into a BC one, that counts a second “finishing” holdback layer, is double-counting the same 10% pool. The release clock differs too: British Columbia allows 45 days from a certificate of completion, against Ontario’s 60-day lien expiry.
See it decided in the Ontario statutory-holdback case file and the British Columbia single-pool holdback file.
A 30-minute call is enough to tell you whether your numbers hold up.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email when the first report lands.
