Financial technology helps contractors get paid and pay out faster. What other benefits do fintech solutions offer?
Guy Saxelby
CEO and Co-Founder
Earlytrade
Fintech in construction can help solve one of the highest-impact problems facing the entire industry: cash flow.
It’s no secret that the construction sector struggles to receive funding/lending—despite being one of our last productive onshore industries. Traditional financial institutions are less enthusiastic about lending to our sector, citing accounting complexities and market volatility. This makes future-based collateral contractor loans risky—and therefore expensive when offered.
Contractors are realizing early payment discounting allows the sector to fund itself, eliminating reliance on traditional lending, while stabilizing the Subcontractors that general contractors rely on.
Our industry has been facing a dilemma, though. Traditional supply-chain finance and factoring require GCs to relinquish control of their cash to a third party. Not an attractive option in any economy. And required discount terms often backfire as subcontractors build the rate into their bid. But modern technology enables scaled early payments, either with vendor partners or even through self-managed programs.
The ideal approach is construction-specific dynamic discounting designed for ethical negotiation—essentially an eBay for cash flow. This equally serves the purpose of both the general contractor and the subcontractor. Subcontractors offer a discount of their choice to receive payment earlier, ensuring they have the flexibility they need. GCs ultimately pay less to complete the project, improving overall profit margins.
This type of early payment program gets money where and when it’s needed the most and allows much-needed flexibility in how contractors manage their businesses.
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