Platform Launched to Protect and Streamline Payments for Property Developers
- 15.07.2021 11:00 am
ProjectPay removes builder risk on construction projects for project financiers and property developers
Building and construction payment platform ProjectPay, has launched a solution to remove risk, while simplifying and streamlining payments for property developers.
Built on proprietary technology, it’s the first end-to-end secure payment solution built specifically for property developers employing construction businesses, to protect their investor returns on projects.
The system is now live having received a £100,000 Innovate UK grant and completed trials of its payment system on two projects in London worth £20 million and £7 million.
The SaaS platform enables all levels of the supply chain to be paid at the same time, thereby removing contractors’ insolvency risk - speeding up payments to contractors and tradespeople and improving cashflow.
It uses smart tech and a proprietary cascading trust system to protect project funds for work completed by subcontractors and suppliers, linking cascading project accounts with the payment request, approval and payment process.
The platform was founded by CEO Louise Stewart, the former chair of an Australian Subcontractors Association, with the aim to minimise the occurrence of missed or delayed payments to tradesmen and subcontractors in construction project supply chains and address the risk of misappropriation of funds or building insolvency.
“Property developers often engage with builders that under-price the project to win it. This often results in builder collapse and builders can also run into financial trouble on another project which collapses”, explains Ms Stewart. “This situation can destroy the property developer’s investor returns, and insolvency practitioners often move in to take possession of the site, laying claim to project funds. ProjectPay prevents this from happening by eliminating that very high risk of contractor collapse.”
Property developers need to make profits, of course, but the current structure of the sector seems to be based on ruthlessly pursuing profits at any cost. It is often the small business contractors and subcontractors employed to deliver the projects that are left chasing late payments and who are in many cases out of pocket.”
The Innovate UK fund was granted to ProjectPay as part of the British government’s sustainable economic recovery plan and the need to transform the payments system for the construction sector, to ensure swift payments from property developers to small businesses and contractors. The government has also advocated the transformation of digital payments and the use of project accounts in its Construction Playbook plan.
Project Bank Accounts have previously faced industry resistance and slow uptake due to their adminstration costs, but the platform uses a tech approach to remove admin costs and enables project financiers to keep track of project capital provided and ensure funds are being used appropriately, so that projects can be completed.
“In the UK and internationally, governments have recognised the value of using project accounts because they work, adds Ms Stewart. If project funds are misappropriated or lost that’s considered an unacceptable use of taxpayers' funds when delivering public sector projects. We need to apply the same standard to property developers in the private sector, who need to ensure they are protecting their investors’ returns. It’s vital to ensure that contractors on the project are getting paid, because they are intrinsically linked to the ability to successfully deliver projects.”
ProjectPay works through a cascading project account system, with payments made to head contractors and their subcontractors engaged on a project from separate project accounts. By removing the non-payment risk, the platform can fund project accounts against contracts for works. It is currently the world’s only ‘buy now, pay later’ interest-free payment platform for building and construction projects.
With offices in Soho, London and Perth, Western Australia, the business is now looking to scale up rapidly in the UK with ‘best fit’ capital partners and VCs within the start-up community.