A platform to simplify the delivery of payables and receivables finance programs

Supply chain finance is the collective term for a group of financial solutions aimed at optimizing cash flow and working capital for all parties involved in a supply chain. Its various products and techniques are designed to enhance the efficiency and effectiveness of financial transactions between buyers, suppliers and financial institutions.

Payables finance is where a corporate (buyer) commits to paying their invoices (or approved invoices) at the day of maturity, which allows a funder to offer the supplier an early payment of those invoices in exchange for a discount based on the buyer’s credit risk.

How it works:

• The supplier sends an invoice to the buyer.
• The buyer confirms that they have received the invoice from the supplier.
• Payment terms are agreed between the buyer and the supplier.
• Early payments terms are sent to the funder.
• The funder pays the supplier their invoice amount with the discount applied.
• The buyer pays the funder the agreed amount at invoice maturity.

Trade finance involves providing finance, risk mitigation and payment solutions to buyers, sellers and other participants involved in global trade.

The objective of trade finance is to minimize the risks associated with cross-border transactions and ensure the smooth flow of goods and services between buyers and sellers in different countries. It provides the necessary funding and financial tools to bridge the gap between the time when goods are shipped and when payment is received, reducing the cash flow constraints faced by businesses engaged in international trade.

Trade receivables finance is a version of supply chain finance where businesses can gain funding for invoices owed to them before the payment date. A receivable purchase agreement is signed between a company and either a bank or specialist finance provider, enabling the company to access financing based on its account receivables.

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Trade receivables securitization is a way for large corporates to sell pools of their outstanding invoices on the capital markets, creating a new source of funding. A seller of products will pool their invoices within a special purpose vehicle (SPV), which in turn will issue securities or notes to investors, the proceeds of which are used to fund the ongoing purchase of receivables.

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Factoring allows companies to sell their book of accounts receivables directly to a funder in exchange for finance; it is a direct transaction between the funder and the company. This is an off-balance sheet treatment for the company as the funder is the now the owner of the receivables.

Securitization uses a special purpose vehicle (SPV) to purchase their pool of receivables. An SPV is an entity created by the selling company and is independent of the company’s balance sheet. The SPV sells the financial notes of these receivables to the funder in exchange the finance, which is passed back through the SPV to the corporate. This is an off-balance sheet treatment because the SPV is the now the owner of the receivables.

Similarities:

• They are receivables finance solutions.
• They allow companies to remove their outstanding receivables from their balance sheets.
• The risk associated with the lines of credit are based on the payment history of the company’s book of receivables.

Differences:

• Funds in a securitization don’t pass directly from funder to the company.
• For a securitization to work, a company needs a large book of receivables to pass through the SPV due to the complexities of the structure.
• In a securitization, the risk sits with the SPV rather than the company.

Distributor finance provides funding to distributors to help finance their inventory and receivables, improving their cash flow and working capital. Manufacturers also have the option to request early payment from the funder for invoices, in which case they will receive the full amount of an invoice from the funder.

How it works:

• The distributor raises a purchase order (PO) with the manufacturer.
• A PO is submitted for approval based on limits.
• For an approved PO, the manufacturer dispatches the goods and sends an invoice.
• The invoice is submitted to the platform and checked against funding criteria.
• Where manufacturer early payment is required, eligible invoices are submitted to funders.
• The funder provides payment for the full invoice to the manufacturer.
• If no extension is required, the distributor pays the funder the full amount at maturity.
• Maturity date extension is requested by the distributor, approved, and all parties are notified.
• The distributor pays the funder the full invoice amount at extended maturity.

Dynamic discounting allows buyers to utilize their excess cash to pay invoices early. Payment terms are often negotiated between the buyer and supplier to accelerate payments in return for a discount on the goods or services purchased. This allows the buyer to invest their cash at a favorable rate while suppliers get access to an alternative source of funding.

How it works:

• An invoice is issued to the buyer from the supplier.
• The buyer approves the invoice.
• The buyer decides when to early pay the invoice.
• A discount is calculated and applied to the invoice value based on the commercial terms agreed.
• The buyer pays the invoice early.

Working capital management is the process of efficiently managing a company’s short-term assets and liabilities. It involves overseeing cash, inventory, accounts receivable and accounts payable to ensure smooth operations and financial stability.

The objective is to maintain a balance between liquidity and profitability by having enough working capital to cover obligations and daily expenses while minimizing costs and excessive investments in current assets.