The uncertainties in the global economy are forcing buyers to support their key suppliers. An increasingly important way is to provide early payment for a discount. For most buyers the success of a Supply Chain Finance programme is judged by how many of their suppliers they can offer early payment discounts to, i.e. the % penetration of suppliers who receive early payment. The number of suppliers requiring early payment varies: some need early payment every month, others only need it a particular moments in the year, e.g. at month or year end. How the SCF suppliers provide early payment discount is a key variable between the different SCF platforms. C2FO, see, which is used by thousands of corporates and companies of all sizes world-wide, including companies such as Costco and Walgreens, employs a unique approach.

C2FO market based discounting platform

C2FO believe that the acceptable/correct APR varies for each supplier and each buyer, so they have created a marketplace on their platform to maximise early payment discounts. At present, C2FO provide their service for funds provided by the buyers. The corporates can also use 3rd party sources of capital within their marketplace.

Like other SCF platform suppliers C2FO provide supplier enrolment programmes to ensure that most suppliers can use early payment discount when needed.

In a typical C2FO user, first buyers send all approved invoices to C2FO, and then:

• suppliers are asked to submit by 10 a.m. what discount they will accept to be paid early, (C2FO encourage suppliers to bid below their alternative cost of borrowing from their bank or other sources of funding)
• buyers tell C2FO the amount of funds available that day for early payment and the minimum overall APR that they need to obtain on the funds offered.

C2FO then calculates, using their proprietary algorithms, the exact APRs and amounts for each supplier to maximise the amount that will qualify for early payment, which, they believe, is far higher than achieved by other platforms. One of the reasons that they achieve greater lending volumes is because they are able to achieve the buyer’s overall target APR, of say 5%, by being able to combine the lending to a supplier who will only pay 4% with a supplier who is prepared to pay 6%. 

Kevin Daniels, Chief Product Officer, C2FO, sums up their impact, “This in effect lets each business in the marketplace name their discrete price for cash and cash flow, thereby creating the most fair way to price cash and cash flow. There are times when businesses are flush with cash and times when they are not. Traditional funding solutions do not allow for discrete pricing and timing of cash and cash flow. C2FO does. This is why C2FO has such a high fill rate for cash and cash flow delivered to businesses across the world.” 

On average C2FO achieve a return for buyers of 5.82% APR and have delivered more than $10 billion in working capital and 60 million days of accelerated payment to businesses world-wide. No wonder that 95% of suppliers on C2FO plan to continue to use them on an ongoing basis. 

Future C2FO development

Over the last five years C2FO have been able to refine and optimise their algorithms for managing each market place, as they have collected more data on supplier behaviour. They now run 15 algorithms daily to test which one works for each client’s marketplace.

C2FO envisages that, as they learn more about each client’s supply chain, they could be able to move from daily assessments to monthly or even yearly assessment to achieve the buyer’s overall target APR return on their funds.

As they grow and attract clients world-wide who are both buyers and suppliers, C2FO are considering how to fund whole supply chains. 

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CTMfile take: C2FO’s creation of a marketplace for early payment discounting enables them achieve a higher penetration of early payment discounts. An even bigger pay-off will come when they are able to offer early payment discounting to whole supply chains.