SUPPLIER FINANCE UNCHAINED

Transcription

1 SUPPLIER FINANCE UNCHAINED Mitigating your Hidden Risks Louise Beaumont Colin Levins Waldo de Vleeschauwer

2 True stories

3 Report published by Zurich Survey comprised of Senior Management 500 UK companies Five sectors

4 Zurich Report s executive summary

5 Supply Chain disruptions - manufacturing 70% say healthy suppliers are critical Only 49% admit their supply chain is reviewed and monitored at board level 68% confirm up to 10 disruptions in the past year alone 97% have suffered disruptions at some point in the past 52% believe supplier bankruptcy is the main cause of disruption Average disruptions lasts 6 weeks 60% suffered loss in sales 54% suffered reputational damage Costing 230k on average (excluding management time) 64% indicated greater interest in their supply chain in the next 12 months

6 So, what can you do? Address the financial well-being of your suppliers Here s how The world as your suppliers see it A revolutionary Supply Chain Finance solution What are the benefits of Market-Driven SCF solutions? Who s providing these solutions? Who s using them? How do they work?

7 The world as your suppliers see it You re their cash rich corporate customer

8 The world as your suppliers see it Saturday, November 30 th Headline Small businesses find loans rarer than diamonds Your suppliers are finding it harder to access finance, which means there s a growing risk in your Supply Chain

9 Recession: high level consequences Massive pullback in bank lending The economy is dislocated Main indices such as the Dow Jones are at all time highs BUT These only represent the world s biggest companies Zombie companies & Bankruptcies Unknown to bigger companies, there is a over reliance on fewer, weaker suppliers

10 A revolutionary Supply Chain Finance solution for you and all your suppliers Market-Driven Solutions Online market places which connect buyers of invoices (Investors), seeking higher yields, to sellers (your suppliers), seeking immediate funding Investors include banks, asset-based lenders, funds and family offices Sellers are suppliers who are looking for alternative finance in difficult economic conditions

11 A revolutionary Supply Chain Finance solution for you and all your suppliers Andy Davis the leading AltFin journalist Markets are inherently more efficient. The market can t have a concentration risk, so the market can absorb risk that other solutions simply can t because they have a single source of finance. Markets, because they have many, many sources of finance, work for more companies, more of the time.

12 The benefits of Market-Driven solutions Your Suppliers On-demand finance No legal, admin or IT costs No IT barrier No lock-ins Multiple sources of capital Competitive, transparent all-in finance rate Flexible on a per invoice basis Reduced admin burden Level playing field across all suppliers Your Company No costs (legal, IT, finance, admin) Fast to set up - days, not months/years Seen to support suppliers in enhancing their working capital, without lock-ins Effective negotiation tool Competitive advantage Option to manage creditor days and cut your finance costs Dynamic Discounting, if you want to No barriers to entry, no barriers to exit

13 Who is providing these solutions? The Receivables Exchange US PrimeRevenue US and Asia Pacific Platform Black UK

14 Leveraging commercially-minded investors to deliver SCF for your suppliers Suppliers Suppliers are encountering growing liquidity problems Business funding shortfall of 84bn to 191bn predicted by 2018 More acute as the economy grows Investors Seeking new ways to make decent returns in a low interest rate environment Seeking the security of assetbased investments in a post-crisis world In 2012, in the UK, the market for full invoice factoring delivered by banks and ABLs was 254bn this accounts for 2%-3% of SMEs, which suggests that conventional forms of invoice finance don't suit most of your suppliers.

15 Scenario 1: End-to-End Supplier Funding A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance Scenario 2: Creditor Day Management A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base Scenario 3: ROI Enhancement A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash

16 Scenario 1: End-to-End Supplier Funding A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance Challenges Solution Benefits Growth companies rely on their supply chain to supply goods on time, on budget and to the correct standard Suppliers require payment for their own raw materials Suppliers are often less established with limited access to working capital Using its strong credit profile, the Company helps its suppliers auction orders and invoices at 100% of value Investors bid down to lowest possible finance rate PB pays each supplier as soon as the auction closes Enhanced supply chain performance - suppliers are well financed Multiple suppliers are able to opt in and out of the programme as and when it suits them Supply chain is well funded - goods are delivered on-time, on budget and to the correct standard

17 Scenario 2: Creditor Day Management A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base Challenges Challenging economic environment - Company seeks ways to maximise cash positions whilst keeping their suppliers wellfunded Increase in creditor days has positive effect on net interest expense Solution The company sends Platform Black monthly batches of invoices The invoices are auctioned, after which funds are transferred to the suppliers The Company pays its invoices on the agreed payment dates The solution is 100% free to the Company Benefits Extension of creditor days is interest-free finance, resulting in net finance savings Enhances working capital management for the Company Suppliers enjoy early payments - enhancing supplier relationships

18 Scenario 3: ROI Enhancement A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash Challenges Solution Benefits Seeking greater returns on excess cash Creditor days > 30, causing supplier working capital pressures No new suppliers not tendering for business Dynamic Discounting acts as investor for a % of its own invoices Seamless integration with existing IT systems via API Free for Wholesaler Supplier only pays small fee for traded invoices Healthy returns for own credit risk Cashflow made available to participating suppliers Full financial flexibility for suppliers Cost of finance is bid down by competing investors

19 How market driven SCF works

20 Q&A November 2013 Winner UK Supply Chain Finance Provider of the Year

21 UNCHAINED! Louise Beaumont Colin Levins Waldo de Vleeschauwer