Financing for the supply chain is changing dramatically, no longer is it dominated by single lead banks or by any particular financing technique. Flexibility is key both in finance sources and the platforms.
PrimeRevenue supply chain finance experience
The experience of PrimeRevenue, a leading provider of supply chain finance programmes with some 250 programmes and 20,000+ user, reveals what is happening world-wide. PrimeRevenue have found that:
- the large majority of their finance programmes are for supply chain finance (reverse factoring)
- demand for dynamic discounting programme is low (less than 5% of all PrimeRevenue supply chain finance programmes globally)
- more and more third party e-invoicing providers are partnering with PrimeRevenue supply chain finance platform to exploit the demand for financing, e.g. partnership with AIG
- global banks are partnering with supply chain finance platform
- the demand for flexible financing is growing as banks are having to be more particular as to which corporates they will finance and also banks’ credit appetites change as the Basel III regulations, etc. evolve.
Multiple sources of flexible funding needed
It is clear from PrimeRevenue’s experience and other evidence that the demand for flexible financing of the supply chain is growing. PrimeRevenue promote how their finance is based on true multi-banking funding with the financing agreement being with PrimeRevenue rather than with the bank direct. Buyers have the flexibility to work with multiple funders or to use their own balance sheet (self funding), without adding complexity or significant workload to the team. Also the platform should make it as easy to connect to multiple funders with the on-line finance agreements being re-assignable.
PrimeRevenue’s “Open Multi-Funding Model” - see figure below - is similar to a revolver, a buyer is not dependent on one bank’s ability to syndicate the entire Supply Chain Finance program. The funders connect directly with PrimeRevenue to fund on the platform and can have a direct relationship with the buyer and their suppliers, see figure below:
Source & Copyright©2015 - PrimeRevenue
A Supply Chain Finance deployment will last many years. While banking relationships will often change, adapt, and mature which may affect the Supply Chain Finance programme. An open platform allows the use of only one set of agreements, one ERP interface, one platform, and one supplier on-boarding process. Such a solution also allows buyers to fund some or all of the program themselves and provides a better user experience to the supplier.
CTMfile take: A key factor in financing the supply chain is the flexibility and robustness of the solution. Having just one bank or financial institution funding the programme is looking increasingly risky and inflexible.
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