The collapse of building contractor Mainzeal is expected to cost sub-contractors tens of millions of dollars and could create a ripple effect throughout the industry.

Many of the sub-contractors including plumbers, painters roofers and electricians may be struggling to stay in business as unpaid firms default on their own payments and attempt to find work in the wake of the collapse.

Tauranga based insurance company Builtin director Jim Rickard says many subcontractors are one man bands that have no insurance.

He is urging all subcontractors who do not already have insurance to make sure they take out payment protection.

'Unfortunately, many small firms look at liability insurance as an unnecessary expense, rather than a cost of doing business, which can help them overcome big shocks to their business, like the liquidation of a major customer.”

Builtin created a payment guarantee policy in the wake of the collapse of Hartner in 2001, which sent many sub-contractors to the wall.

While big companies can get trade credit insurance, it's the small and medium sized firms that often can't recover if they're not paid for what can be weeks and even months of work.

'Very, very few have any form of cover in this type of scenario.”

'For about $20 a week subbies can get cover up to $25,000, enough to cover two weeks, working on the basis that if you are a couple of weeks behind then you stop working until you are paid - and you might have $25,000 hanging out there.

'Some of the bigger guys they might have $100,000 out there but we are not catering for the big, big guys, they have got their own cover. This is targeted at the small and medium guys.”

'We see it as one of those things where if you can plan to spend $20 a week it means if you get a hit of $25,000, it doesn't tip you over.”

'A lot of these small guys don't have much margin, but they have got to manage their business to flatten out the risks. Unfortunately we work in an industry where we often get the phone call after the event.”

There are no statistics available, but he thinks less than five per cent of building and related trades sub-contractors would carry payment guarantee insurance.

If a company goes bust, sub-contractors are unsecured creditors and are at the back of the queue for payment after liquidation.

'If a company goes into liquidation, and the policy holder makes a claim with us the sub-contractors get their money and are in business, and it's the insurance company that stands in the queue for them.”

Mainzeal receivers PWC announced today around 200 staff will be made redundant in an attempt to reduce the company's operating costs.

The property and construction company employed 440 people.

The jobs cuts are expected to make the failed company more attractive to potential buyers.