Supply chain finance is a set of technology-based business and financing processes that link the various parties in a transaction—buyer, seller and financing institution— to lower financing costs and improve business efficiency. Short-term credit that optimizes working capital for both the buyer and the seller is provided by what the hip kids refer to as SCF.
There are several SCF transactions, including an extension of buyer’s accounts payable terms, inventory finance and payables discounting. The SCF solutions differ from traditional supply chain programs to enhance working capital, such as factoring and payment discounts, by connecting financial transactions to value as it moves through the supply chain. Also, SCF encourages collaboration between the buyer and seller, rather than the competition that often pits buyer against the seller and vice versa.
Tom Roberts, senior vice president of Marketing at PrimeRevenue, warned Global Trade readers in September 2016 that a multinational bank may not be the way to go when it comes to SCF. “First, both global supply chains and multinational banks are highly susceptible to changes in the economic and geopolitical landscape,” Roberts wrote. “Supply chain finance programs that are locked into a single source of funding are held hostage to that funder’s risk tolerance. It’s a dangerous game, especially as the global coverage of multinational banks continues to be a moving target.”
No one bank—no matter how global—has the processes and systems in place to serve all currencies and jurisdictions, he also noted. “If a company needs to add a supplier that can’t be funded by their multinational bank, they have to not only source alternative funding, they have to handle the back-end systems integration required to facilitate the trading of receivables. It’s a resource-intensive approach that many companies simply can’t afford.”
The best-in-class supply chain finance programs are typically based on multi-funder platforms, rather than closed, bank-proprietary platforms, according to Roberts. “While it may seem counter-intuitive to simplify supply chain finance by adding more players, it’s not,” he wrote. “With the right processes and systems in place, a multi-funder strategy can increase program participation, secure more competitive pricing and discounts, and ultimately increase cash flow predictably and sustainably for both buyers and suppliers.”
What follows are Global Trade’s picks for places to consider for SCF.
Located on Madison Avenue in New York City, Raistone Capital started as a division of Seaport Global, a full-service, independent investment bank. Today, Raistone Capital has access to significant levels of institutional capital and the ability to deliver on customer’s needs, “whether it’s $50,000 or $300,000,000+,” according to the company. Raistone even created invoiceXcel (iX), a complementary financial solution so banks “can continue to serve clients in this ever-changing regulatory environment by providing additional capital offerings to customers—such as supply chain finance and accounts receivable finance.”
Headquartered in San Francisco—with global offices in several major U.S. cities as well as Hong Kong, mainland China, Germany and Holland—Flexport offers clients lines of credit ranging from $100,000 to $20 million to finance inventory, freight and duty and so that customers can accelerate product expansion and revenue growth; enable strategic decisions that reduce landed costs; and minimize supply chain disruption. Best of all, it costs nothing to connect with a Flexport Capital expert to discuss how your supplier terms, customer terms, and capital structure can be optimized to support your working capital goals and business growth.
Giving the expertise Tom Roberts has already shared via Global Trade, how could we in good conscience skip over his Atlanta-based company that also has offices in Hong Kong, Australia, London, Frankfurt, and Prague. Billed as “the leading provider of working capital financial technology solutions,” PrimeRevenue helps more than 30,000 clients in 70+ countries optimize their working capital to efficiently fund strategic initiatives, gain a competitive advantage and strengthen relationships throughout the supply chain. Established in 2003, PrimeRevenue boasts of now having “the largest and most diverse global funding network of more than 100 funding partners.” They support 30+ currencies on a single cloud-based, multi-lingual, cross-border network, facilitating a volume of more than $200 billion in payment transactions per year.
Trade Finance Global
London-based TFG assists companies with raising debt finance, accessing many traditional forms of finance while also specializing in alternative finance and complex funding solutions related to international trade. “We help companies to raise finance in ways that are sometimes out of reach for mainstream lenders,” according to the company, which taps into more than 250 lenders with unique focuses on different products and/or geographies. And TGF boasts of being able to “quickly get to the key decision-makers of financiers, to make sure your application gets through to the right person.” That ability is built on reputation alone, as TGF is 100 percent independent and not tied to any lenders. Instead, they find the most appropriate SCF solution for the individual customer.
Bank of America Merrill Lynch
Okay, much of this article details why a multinational bank may not be the best option when it comes to SCF, but Charlotte, North Carolina-based Bank of America Merrill Lynch, which also has central hubs in New York City, London, Hong Kong, Minneapolis, and Toronto, does have a solid, end-to-end SCF program. Bank of America Merrill Lynch boasts of having a number of tools to help: segment suppliers and analyze rates; design an optimal marketing program; and educate suppliers on program benefits.
“Bank of America Merrill Lynch made sure that the resources needed—support staff, legal, credit and such—all worked towards achieving the efficient deployment of the program,” says Philippe Andre Marcoux, credit and treasury manager at SCF customer Uni-Select Inc., a large multiservice corporation that distributes motor vehicle replacement parts, tools equipment and accessories. “Communication between Bank of America Merrill Lynch, our suppliers and ourselves was the driving force behind the successful implementation. Tools to evaluate the benefits to our suppliers and ourselves were key in convincing our team to participate.”