SUPPLIER FINANCE
UNCHAINED
Louise Beaumont Colin Levins
Waldo de Vleeschauwer
Report published by Zurich
• Survey comprised of
– Senior Management
– 500 UK companies
– Five sectors
Supply Chain disruptions - manufacturing
• 70% say healthy suppliers are critical
• Only 49% admit their supply chain is reviewed and monitored at board level • 68% confirm up to 10 disruptions in the past year alone
• 97% have suffered disruptions at some point in the past
• 52% believe supplier bankruptcy is the main cause of disruption • Average disruptions lasts 6 weeks
– 60% suffered loss in sales
– 54% suffered reputational damage
– Costing £230k on average (excluding management time)
So, what can you do?
Address the financial well-being of your suppliers
Here’s how
• The world as your suppliers see it
• A revolutionary Supply Chain Finance solution
• What are the benefits of Market-Driven SCF solutions?
• Who’s providing these solutions?
• Who’s using them?
• How do they work?
The world as your suppliers see it
You’re their cash rich corporate customer
The world as your suppliers see it
Your suppliers are finding it harder to access finance, which means
there’s a growing risk in your Supply Chain
Saturday, November 30
thHeadline
Small businesses find loans
‘rarer than diamonds’
Recession: high level consequences
• Massive pullback in bank lending
• The economy is dislocated
– Main indices such as the Dow Jones
are at all time highs
BUT
– These only represent the world’s
biggest companies
– Zombie companies & Bankruptcies
• Unknown to bigger companies, there is a
A revolutionary Supply Chain Finance
solution for you and all your suppliers
Online market places which connect
buyers of invoices (Investors), seeking
higher yields, to sellers (your suppliers),
seeking immediate funding
Investors include banks, asset-based
lenders, funds and family offices
Sellers are suppliers who are looking for
alternative finance in difficult economic
conditions
A revolutionary Supply Chain Finance
solution for you and all your suppliers
“Markets are inherently more efficient. The
market can’t have a concentration risk, so
the market can absorb risk that other
solutions simply can’t – because they have
a single source of finance. Markets,
because they have many, many sources of
finance, work for more companies, more of
the time.”
The benefits of Market-Driven solutions
Your Suppliers
On-demand finance
No legal, admin or IT costs No IT barrier
No lock-ins
Multiple sources of capital Competitive, transparent all-in
finance rate
Flexible – on a per invoice basis Reduced admin burden
Level playing field across all suppliers
Your Company
No costs (legal, IT, finance, admin)
Fast to set up - days, not months/years Seen to support suppliers in enhancing
their working capital, without lock-ins Effective negotiation tool
Competitive advantage
Option to manage creditor days and cut your finance costs
Dynamic Discounting, if you want to No barriers to entry, no barriers to exit
Who is providing these solutions?
The Receivables Exchange • US
PrimeRevenue
• US and Asia Pacific Platform Black
Leveraging commercially-minded investors
to deliver SCF for your suppliers
Suppliers
• Suppliers are encountering growing liquidity problems • Business funding shortfall of
£84bn to £191bn predicted by 2018
• More acute as the economy grows
Investors
• Seeking new ways to make decent returns in a low interest rate environment
• Seeking the security of
asset-based investments in a post-crisis world
In 2012, in the UK, the market for full invoice factoring delivered by banks and ABLs was £254bn – this accounts for 2%-3% of SMEs, which suggests that conventional forms of invoice finance don't suit most of your suppliers.
Scenario 1: End-to-End Supplier Funding
A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance
Scenario 2: Creditor Day Management
A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base
Scenario 3: ROI Enhancement
A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash
Scenario 1: End-to-End Supplier Funding
A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance
Challenges
• Growth companies rely on their supply chain to supply goods on time, on budget and to the correct standard • Suppliers require payment
for their own raw materials • Suppliers are often less
established with limited access to working capital
Solution
• Using its strong credit profile, the Company helps its suppliers auction orders and invoices at 100% of value
• Investors bid down to lowest possible finance rate
• PB pays each supplier as soon as the auction closes
Benefits
• Enhanced supply chain performance - suppliers are well financed
• Multiple suppliers are able to opt in and out of the
programme as and when it suits them
• Supply chain is well funded - goods are delivered on-time, on budget and to the correct standard
Scenario 2: Creditor Day Management
A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base
Challenges
• Challenging economic environment - Company seeks ways to maximise cash positions whilst
keeping their suppliers well-funded
• Increase in creditor days has positive effect on net interest expense
Solution
• The company sends Platform Black monthly batches of invoices
• The invoices are auctioned, after which funds are
transferred to the suppliers • The Company pays its
invoices on the agreed payment dates
• The solution is 100% free to the Company
Benefits
• Extension of creditor days is interest-free finance,
resulting in net finance savings
• Enhances working capital management for the
Company
• Suppliers enjoy early payments - enhancing supplier relationships
Scenario 3: ROI Enhancement
A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash
Challenges
• Seeking greater returns on excess cash
• Creditor days > 30, causing supplier working capital pressures
• No new suppliers not tendering for business
Solution
• Dynamic Discounting – acts as investor for a % of its own invoices
• Seamless integration with existing IT systems via API • Free for Wholesaler
• Supplier only pays small fee for traded invoices
Benefits
• Healthy returns for own credit risk
• Cashflow made available to participating suppliers
• Full financial flexibility for suppliers
• Cost of finance is bid down by competing investors
Q&A
November 2013 Winner
UNCHAINED!
Louise Beaumont Colin Levins
