No longer content to be viewed as the bankers’ metaphorical middle child, growth corporate CFOs and treasurers seek “Relationship-based banking and working capital solutions tailored to their specific industries, spending habits and business needs. They also expect bankers to offer digital-first, friction-free services with faster approval processes aligned with their strategic growth agenda. Status quo working capital solutions and processes no longer check that box for these firms”, according to the 2024-2025 edition of the Growth Corporates Working Capital Index, a Visa report conducted by PYMNTS Intelligence.

As outlined in the Visa report, most banks classify growth corporates or middle-market companies as those generating between US$50 million and $1 billion in annual revenue.

The report reveals insights into the business conditions and working capital needs of 1,297 CFOs and treasurers representing middle-market organizations across eight industry segments, five global regions (North America, Europe, the Asia Pacific, Latin America and the Caribbean, and Central Europe, the Middle East and Africa), and 23 countries. The research study was carried out between May 21 and July 9, 2024.

The working capital solutions include seven financing options that growth corporates use to secure external capital. These consist of working capital loans, bank lines of credit, overdrafts from corporate bank accounts, corporate/virtual credit cards, invoice financing and factoring, non-bank credit facilities, and letters of credit and bank guarantees.

The report goes further to present key insights into the adoption of working capital solutions by growth corporations. Here are three crucial takeaways:

Growth corporates use working capital solutions to enhance operational efficiency and for strategic reasons

While 81% of finance chiefs and treasurers at growth corporates adopted at least one working capital solution in 2024—a 13% year-over-year (YoY) increase—nearly half of growth corporates improved their operational efficiency by leveraging working capital solutions to ensure more predictable cash flow management and strategic investment funding, the Visa report noted.

There has also been a rise in the utilisation of working capital solutions by growth corporates for strategic reasons, such as covering business expansion, buying inventory or services, investing in company assets, upgrading legacy systems, improving environmental sustainability, and consolidating debt, the report added.

Looking ahead to 2025, middle-market companies across eight industry sectors intend to increase their use of external working capital and deploy it more strategically than they did in 2024.

As stated in the Visa report, “Eight in 10 CFOs and Treasurers in professional and facility services expect to use solutions strategically and 57% expect to use them to drive business growth. Commercial travel and retail/marketplaces also show high rates of projected strategic users (73% and 74%, respectively), albeit not only for growth but also to cover seasonal financing needs. Fleet and mobility, healthcare and professional/ facility services are leading the charge, with half or more planning to use working capital solutions to drive growth.”

Working capital solutions boost business metrics for top-performing growth corporations

Eighty percent of top-performing growth corporations reported improved business metrics through the use of working capital solutions.

Based on the Visa report, “Key metrics for sales, payables and inventory are measured in days outstanding—how long it takes to collect payment after a sale, to pay suppliers after receiving goods and services or to have sold through inventory, respectively.”

While over the past year, working capital solutions enabled 27% of growth corporates to collect payments faster, 26% to expedite supplier payments, and 25% to cycle through inventory more quickly, more than half (58%) of top-performing growth corporates saw improvements in their working capital ratios and other metrics. This is evidenced by “51% shorter cash conversion cycles and 28% shorter days payable outstanding (DPO) than Growth Corporates in the bottom 20% of Index scores— bottom performers—saving an average of $11 million in interest, inventory carrying costs and supplier discounts. That marks a 300% increase from $3.3M in 2023”, the report further added.

CFOs and treasurers prefer on-demand access to working capital solutions

The report indicates that only 3% of all growth corporates experience smooth access to working capital solutions. Consequently, CFOs and Treasurers at these companies increasingly prefer flexible, on-demand working capital solutions at competitive rates. This approach facilitates agility and ensures rapid access to funds, eliminating the need for loan applications when financial demands present themselves.

The shift towards flexible working capital solutions is demonstrated by the 32% increase in corporate and virtual credit card usage and the 37% rise in bank lines of credit, while working capital loans remained largely unchanged YoY. These options grant finance leaders and treasurers the flexibility to tap into funds as required, bypassing the need for additional approval process.

In conclusion, to ensure sustained and scalable growth, it is vital for middle-market enterprises to leverage the right working capital solutions. In this regard, the 2024-2025 Growth Corporates Working Capital Index builds on the insights from last year, demonstrating notable advancements in working capital efficiency due to the use of flexible and strategic working capital solutions. By improving cash visibility and optimising external working capital resources, CFOs and treasurers have enhanced liquidity, lowered DPOs, fostered superior buyer-supplier payment integration, and shortened cash conversion cycles, helping them navigate challenges and achieve steady growth.

The outlook for growth corporations heading into 2025 remains positive. In fact, the Visa report points out that more firms in this segment are expected to turn to corporate virtual cards and working capital solutions to address persistent concerns surrounding supply chains, borrowing costs, and global economic uncertainties. The report further notes that “The most efficient companies expect further improvements in their metrics and 97% of them expect to use external working capital strategically.”