We have a tendency to talk about the Buyer’s organization frequently and the benefits that they realize utilizing a robust supply chain finance program…but the Suppliers? What about the Suppliers? Working with Buyers and Suppliers, FSW Trade Finance’s experience indicates that most Suppliers achieve financial benefits that are just as positive as the benefits experienced by the Buyer. Suppliers benefit from getting paid early, having better visibility into payment processing and having access to working capital that can be invested in growing their business. Their business may be even more dependent on the needed cash flow because they are generally smaller and are operating with less cash availability.
All companies need working capital without bottlenecks to run smoothly through the supply chain. Suppliers, like Buyers, need cash flow to pay for operating expenses, innovative investment or a cushion to weather a turbulent or slower economic cycle. Many times, the Supplier waits 60+ days for the Buyer to pay for the Supplier’s delivered products or services, while some suppliers experience angst when their own payroll or accounts payable is due. Most likely a Buyer has more than one avenue to receive cash flow, whereas a supplier’s alternatives may come at a very high cost or may not be available at all.
Today with new and innovative technology, a Supplier has access to the benefits of Supply Chain Finance (SCF). They can access cash flow at a lower cost than a loan (or factoring) by paying a small discount when requesting early payment in an SCF program. In addition, a Supplier’s loan can negatively impact its debt to equity ratios or other covenants whereas SCF has no effect on the supplier’s balance sheet.
FSW Trade Finance’s QuickPay program benefits both the Buyer and the Supplier. The Buyer can extend their payables terms and the Supplier is able to access cash early. They both can continue to operate and grow without the working capital drain on their business.