Hong Kong fintech start-up offers loans to unpaid subcontractors amid building slump
- As a financing gap in construction widens, Riverchain offers relief to subcontractors, who are often the last to get paid for their work
A Hong Kong building subcontractor surnamed Chan, who was responsible for electrical and mechanical work in air-conditioning systems on a project at Hong Kong International Airport at the beginning of this year, waited several months for the project’s main contractor to pay him.
Seeking relief from his liquidity problem, Chan even approached banks but was told that a loan would take months to approve, as lenders are now more cautious when it comes to construction projects.
The sector is facing challenging times with a financing gap that continues to widen. Back-to-back payment arrangements, long waits for invoices to be paid, and time-consuming paper-based processes are locking up an estimated HK$53.8 billion (US$6.9 billion) in the construction supply chain each year and creating a need for accessible and efficient working capital, according to Riverchain, a Hong Kong-based fintech start-up that is trying to address that need.
A construction subcontractor hired to handle a specific aspect of a larger construction project often needs to obtain a cash advance to cover the wages of its employees and materials bought for other projects in hand while waiting for payments to come through.
“I waited more than six months, and final payments took even longer,” Chan said, declining to disclose the amount he was owed.
He tried to borrow money from friends and even used a property as collateral, but “the approval also took some time, which can’t ease cash flow issues”, he said.
