Construction equipment financing
building materials financing
construction logistics technology
embedded credit
infrastructure financing
Hyundai Construction Equipment

Here’s how platforms can drive disruptive innovations in ‘construction financing’, with FinBox

Anna Catherine   /    Content Specialist    /    2023-01-05


Infrastructure financing is a Gordian knot that governments, financial institutions, and infra promoters have been trying to untie for decades. The crux of the problem is the long gestation period of infra projects, which makes it difficult for banks and NBFCs to finance them. 

How do you leverage short-term liabilities to finance long-term projects? It’s unsustainable — case in point — IL&FS crisis. But this is only one part of the problem. Once an infra project successfully raises funds, it makes way for a slew of snags in implementation. 

Here’s a glimpse of the problem’s extent. Just last year, the Ministry of Statistics and Programme Implementation reported that among infra projects (worth 150 crores and above) under its observation, 439 of them were hit by cost overruns totalling more than ₹4.4 lakh crore. And the average time overrun in 557 delayed projects was 45.69 months— that is almost four years.

Impediments and inefficiencies plague the sector, seriously threatening the achievement of India’s developmental plan. At the providers’ end, some of the reasons for delays are inadequate manpower, low construction productivity,poor supply chain visibility, inefficient logistics, and significant price variation in materials. 

The above infographic shows the various stages of the construction value chain. An infra project’s first step is to secure financing as is clear from the figure. But what follows is not a straight-line implementation as the image would have you believe. In reality, a mix of processes and actors work simultaneously making up a complex, intrinsic web. The good part? Each stage or process of the value chain is embracing technological transformation to move from a highly complex, fragmented, and project-based industry to a more standardised, consolidated, and integrated one.

The construction industry is moving to platforms

There's a compelling economic logic for platforms to take over — i.e. productivity gains. The construction industry, all over the world, suffers from inefficient, sloppy processes that cost us a fat percentage of the global GDP. Mckinsey had projected a 1.1% GDP loss for India in 2017 due to delays alone. And platforms are the way forward, for they have begun to own and drive scalability into each of the focus areas of the construction value chain — be it construction equipment trade, materials procurement, logistics technology for fleet management & materials delivery, workforce management and other software solutions that engage general contractors, sub-contractors, architects and more. 

Infra.Market, Hyundai Construction Equipment, iQuippo, Equipment Rentals India are some of the platforms in the construction equipment segment (CE) in India. Platform penetration is deepening, and everybody — big and small — seems to want a share of the pie. For instance, Aditya Birla Group flagship Grasim announced its foray into B2B e-commerce platform for building materials. Wehouse and Magma are emerging players in the construction aggregator space. Infraprime works towards filling gaps in the construction logistics market, with the aim of preventing delays in the project.

Digital platforms + fintech use cases in the construction industry

  • Construction equipments marketplace + Equipment financing + Insurance

  • Building materials marketplace + Credit line

  • Labour and professional marketplace + Business loans / working capital loans for general contractors, sub-contractors, etc

  • Logistics technology platform + Term loans for fleet operators + BNPL for rentals and leases

Credit-integrated platforms — the much-needed boost for Public Private Partnership in infra

Embedding credit across the value chain is the natural way to grease the wheels of development. No more cash-strapped vendors. No more cost and time overruns. 

It is only natural for platforms to gravitate towards embedded credit. For instance, for a platform that connects general contractors with building material suppliers, it only makes sense to have a fintech partner that can give its participants access to a network of lenders. Such a trend could improve the flow of capital through the entire ecosystem. Additionally, it could prove to be a new stream of revenue for the platform itself, one that drives up customer stickiness and average order values (AOV) alongside generating revenue.

Go the Amazon way, with FinBox

Platforms and marketplaces in the construction industry can leverage FinBox’s infrastructure to: 

  • Offer customers white-labelled, in-context credit and seamless experiences

  • Access a diverse network of lenders to fuel growth

  • Scale the business and discover alternate revenue streams

  • Access a whole suite of credit infrastructure and risk intelligence products to offer B2B BNPL, B2C BNPL, credit line, business loans, personal loans, co-lending offers, co-branded cards, and more

At FinBox, we help platforms in the construction industry adopt a digital-first approach that ensures seamless and instant customer experience, while retaining personalisation. For example, let’s say you are a construction equipment marketplace. Your customers may have different risk profiles such as: 

  • First-time buyers: They are new to buying CE and are price conscious. They find it difficult to access credit from traditional sources due to absence of credit history. 

  • Retail buyers:  Small players who have purchased CE before, and are price conscious but also give due consideration to quality. They typically have a limited credit history. 

  • Established players: They make purchases as part of long-term investment. 

  • Strategic contractors: They buy machinery/ equipment only after a contract is awarded.

  • Strategic hirers: They manage a fleet of machines/equipment on rent instead of buying and owning them

Credits: Deloitte

A one-size-fits-all approach is not the best way to service loans to all these customer segments. Here’s where our risk intelligence products shine. They pull and parse device & platform data in a fully consented and anonymised manner to generate curated offers for each customer, in minutes. To know more about how FinBox can power credit on your platform, reach out to us