Trade Payables Solutions

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Trade Payables

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2 Trade Payable Solutions

Our Trade Payable Solutions allow you to extend your

DPO with your Suppliers; both with or without their legal

involvement, allowing you to;



Improve your liquidity



Enhance your Balance Sheet working capital position



Lengthen the payment terms of your own Suppliers.



Obtain low cost short-term financing without

increasing leverage

We offer a range of solutions tailored

to your needs.

With GSCF, you can improve your working capital without compromising

relationships in your supply chain.

DPO DSO

▼DSO

▲DPO

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Are you the Seller or Buyer in the relationship that needs more liquidity? Receivables servicing Automatic payment reconciliations, reduced administration costs and improved data visibility.

Extension of Buyer Terms

Increased payment terms to your Buyers without impacting your working capital or balance sheet.

Trade payables financing

Buyers looking to extend their payment terms, to Suppliers who do not offer such extensions.

Supplier financing

Buyers extended

payment terms and offers Suppliers access to financing, based on the higher credit rating of the Buyer.

Distribution Financing

Maximising benefits for all stakeholders by combining reduced DSO for Suppliers and longer DPO for Buyers.

Factoring

Improve your cash flow by accelerating your cash collections and reducing your credit collection risk.

NO

YES

Seeking to shorten DSO or extend Buyers’ DPO?

Will the Seller accept being legally involved? YES NO DSO DPO BOTH BUYER SELLER

Trade Payables Solutions

Trade Receivables Solutions

FUNDED

UNFUNDED

Do you need

to improve

liquidity in

your supply

chain?

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Trade Payables Financing

=

Supplier DSO

▲ Buyer DPO

Program

overview

Trade Payables Financing has been designed for Buyers looking to extend their payment terms, towards their key Suppliers.

The structure is relatively fast to implement, with light documentation requirements. Suppliers are not legally involved in the program and only need to acknowledge that funds will be paid by the Funder on behalf of the Buyer.

Benefits to

Buyer

Quick to implement, improved liquidity and financial stability.

 Extend payment terms towards key Suppliers who do not currently offer such extensions

 As Suppliers are not legally involved, Buyers have the freedom to implement a truly tailored program

 If an early payment cash discount is offered by the Supplier, the program can collect this for the Buyer

 Fast implementation, with light documentation requirements

 Credit lines with relationship banks are freed up for alternative investments

 The program could be classified as Trade Payables (thus extending DPO) rather than short-term debt, depending on the Buyers’ jurisdiction and auditors

Benefits to

Supplier

Trading terms remain unchanged in addition to:

 Enhanced Buyer relationship

 Reduced credit risk due to payment from a Funder

 Timely settlement of receivables leads to more accurate cash forecasts

Ideally suited to

Buyers with high concentration of business with few

suppliers looking to extend payment terms and also achieve working capital benefits.

DSO Supplier

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Supplier Financing

▼ Supplier DSO

▲ Buyer DPO

Program

overview

Supplier Financing allows Buyers to obtain extended payment terms and offers Suppliers access to working capital financing, based on the higher credit rating of the Buyer.

Benefits to

Buyer

Improved liquidity and financial stability

 Balance Sheet benefit - increased DPO

 Improved liquidity by receiving increased payment terms

Benefits to

Supplier

 Enhanced relationship with Buyer by extending their credit terms

 Access to low cost financing based on highly rated Buyer

 Timely settlement of receivables leads to more accurate cash forecasts

Ideally suited to

Large, well-rated Buyers who have many Suppliers and are seeking to optimize working capital.

DSO Supplier

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Our software platform

Our proprietary technology platform offers

unparalleled flexibility and automation for

management of supply chain finance programs.

Some benefits include;



Multi-currency, multi-lingual platform designed

for your global requirements



Fully automated processing that reduces

administration costs and risk of manual error



Credit limit approvals at Purchase Order stage



Real-time payment reporting empowering your

business to make informed credit decisions



Technically integrated with Funders and credit

insurers for reduced administration and faster

credit limit approvals

Visibility

 Web portal so you can always access your

program information.

 Easy to understand, customisable dashboards at summarised and detailed levels.

 Identifies and notifies stakeholders of potential credit risks automatically.

Automation

 Automated notifications and alerts

customized to your requirements

 Real-time reconciliation of payments to invoices and available credit limits

 Credit limit requests automatically sent to approvers enabling faster processing

 Processing in accordance with credit

insurance policy conditions, always ensuring compliance

Ease of Use

 A system that points you in the right direction _{letting your people know what requires their}

attention.

 Extensive training from our multi-lingual operations teams located across Europe and the Americas.

Our in-house development team allows us to add further

individual features if required.

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Typical Program Cycle

1

Order Placement

2

Invoice and goods sent out

3

Buyer uploads Supplier invoice data to GSCF system

4

Invoices verified by Buyer

5

Report sent to confirm amount due to Supplier from Funder

6

Funds paid to Supplier by Funder

7

Report sent to Buyer confirming amount and due date

8

Buyer pays amount due to Funder on agreed terms

Notes

* By changing the timing of steps 6 and 8 relative to standard credit terms determines the improvement in DSO and DPO for Supplier and Buyer.

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FAQs

1. Is there a minimum program size?

Supplier Financing programs are typically sizeable, as they involve

large buying corporations, and become a useful solution when there is a significant number of Suppliers on-board the program.

However, Trade Payables Financing programs (also called Synthetic Receivables) are typically smaller as they are conceived as a single Buyer-single Supplier financing solution. These programs tend to grow rapidly and have more Suppliers added, although there are usually less than 10 Suppliers involved as it is only meant for “key” Suppliers. GSCF considers Trade Payables Financing transactions with total program limits above USD 10 million (or equivalent).

2. What type of agreement is required?

In Supplier Financing programs, the Funder needs to execute a

Receivable Sale and Purchase Agreement (RPA) with each Supplier to be on-boarded onto the program and a Promise to Pay with the Buyer sponsoring the program.

In Trade Payables Financing programs, the Buyer and Funder execute a Supplier Trade Settlement Services Agreement (or STSSA) and Suppliers only sign a non-legally binding letter acknowledging the program. The STSSA is a brief document that is usually executed quickly.

3. What is the involvement of the Supplier/s in Trade Payables Financing?

Supplier/s issue an acknowledgement letter indicating that they are aware of the program. This non-legally binding letter which reduces the risk involved for the Funder and therefore the overall program costs. In addition, this contributes to achievement of favourable accounting treatment for the Buyer; i.e. trade payables as opposed to bank debt.

4. What is the accounting treatment of Trade Payables Financing programs?

The Buyer sponsoring the program is normally able to account for the extension of terms granted by Suppliers through the program as trade payables, rather than debt, hence enhancing working capital via the increase in Days Sales Payables (DPOs). It is worth noting that the accounting treatment will be ultimately defined by the company´s auditor and will depend on the accounting rules applicable.

5. How much will a program cost?

Supply Chain Finance programs are designed to be more competitive than short-term bank financing due to the lower level of credit risk taken by the Funder.

Program cost will be determined by:

 The financing term

 The level of credit risk involved for the Funder

 Credit mitigants required on the Buyer risk, including credit insurance or collateral posted by Buyer

 Legal setup costs (variable depending on country)

6. Will we need to post collateral?

Depending on the risk profile of your company, collateral may be required by the Funder in the form of cash or a letter of credit for a percentage of the program credit limit.

7. Is credit insurance required?

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8. What are the key milestones and timelines to implement a Trade Payables Financing program?

Below is a high-level overview of the steps leading to the successful implementation of a Trade Payables Financing program:

i) Initiation: Submission of information related to your key Suppliers where you would wish to finance your Trade Payable and collection of your financing requirements.

ii) Structuring: GSCF reviews with its partner finders and credit insurance providers if required, and reverts with a solution structure and initial offer via a Term Sheet including:

a. Supplier relationship selected for financing via the program b. Credit Limit offered

c. Terms of the program d. Initial pricing estimate

e. Conditions precedent to program activation e.g. financial statements

f. Information required for a final offer

iii) Process Definition: Once the Term Sheet is signed and we approach activation of the program, our Business Operations team collects your reporting requirements and performs any implementations required in order to customize our platform and its capabilities to your specific requirements.

iv) Activation: Once the required program documentation has been executed, we will perform the final steps leading up to program activation, such as:

a. Conduct technical discussions and perform testing for transmission of your A/P data to GSCF’s platform. b. Conduct training sessions on using our web-accessible

portal

c. Set up user accounts and accesses to the program portal

9. How will you support my business once our program has been activated?

Upon setting up a program a dedicated Credit Operations team will be assigned to the program and will be responsible for activities such as performing and monitoring day-to-day tasks and communication related to the program, as well as handling queries and requests you might have.

10. How can GSCF offer my business continuously competitive financing?

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