Treasury & Trade Solutions North America Trade Finance Citi Supplier Finance Supplier Finance Program for UTC Suppliers
The Solution UTC and Citi have entered into a partnership that enables preferred suppliers to sell their UTC receivables to Citi at a favorable rate commensurate with UTC s credit strength Once receivables are accepted by UTC, suppliers have the ability to access cash on their receivables Suppliers gets short term funding: Without recourse (i.e. no clawback) At attractive rates, based on UTC s credit strength Without using the Supplier s own credit lines, and Without paying the high discount costs associated with typical factoring arrangements The program equips Suppliers with an off-balance sheet funding solution Citi takes on the payment risk of UTC Not mandatory for Suppliers to be customers of Citi or open any Citi accounts
Citi Supplier Finance - Process Flow Suppliers benefit from early visibility, certainty of payment and financial flexibility 1 2 3 4 UTC approves supplier s invoice for payment UTC generates instructions for Citi to pay Supplier on future due date Supplier is notified of future payment through Citi Supplier may immediately convert future payment to cash 5 On due date, UTC funds disbursement account for the full amount due Steps: 1. UTC approves Supplier s invoice for payment using existing process. 2. Once an invoice has been approved for payment, UTC instructs Citi to pay the Supplier on the future due date. UTC s ERP / AP environment will be integrated with Citi for processing of payment instructions. 3. Supplier is notified via Internet (email & website) of payment on a future due date and can see payment instruction: UTC s name, the amount, the due date and associated remittance details. No implementation required by Supplier. 4. Supplier may immediately and electronically discount the underlying receivables to cash without recourse, at an attractive discount rate. 5. Citi debits UTC s Disbursement Account for the full amount of payment due on the future due date.
Early Payment Options Supplier Payment Options Automated Early Payment Option Funds are automatically deposited into the Supplier s bank account typically one day after UTC uploads accepted invoices into Citi s system Funds are sent to the Supplier electronically via ACH either CCD+ or CTX remittance available No need to request early payment manually Manual Early Payment Option Manual suppliers can discount individual payment instructions, instructions due on a specific date OR all payment instructions Funds are electronically deposited into your bank account generally one day after you request early payment OR Automatically Discount Receivables Manually Request Early Payment Hold Receivable to Maturity
Charge to Suppliers Formula Illustration Citibank s program has been designed to provide you with a cost-effective source of alternative financing Annual Payment Amount X Discount Days Left in Term X Rate 360 = Discount Charge (LIBOR + Citibank Spread) London Inter-Bank Offered Rate Rate at which banks lend to each other Citibank Fee for the program
Supplier Pricing Example Citibank s program has been designed to provide you with a cost-effective source of alternative financing Actual Invoice approval time may vary based upon approval process with UTC $100 X 1.50% X 90-10 360 = 0.39% or $0.39 ( 0.25% + 1.50%) London Inter-Bank Offered Rate Rate at which banks lend to each other 90-Day USD LIBOR = 0.25% Citibank Spread = 1.50% On $100 invoice due in 90 Days, you can receive $ 99.61 in 10 days. This is equivalent to discounted terms of 0.39% 10 Net 90.
Supplier Cash Flow and Savings - Example Without the Citi Program With the Citi Program Annual Spend (Sales to UTC) $ 10,000,000 $ 10,000,000 Days Carrying 90 10 Days Financing 0 80 Carrying Cost - (WACC Estimates) 6.00% 6.00% LIBOR + Citibank Spread N/A 1.75% Carrying Cost $ 150,000 $ 16,667 Citi Discount Fee $ - $ 38,889 Total Cost $ 150,000 $ 55,556 TOTAL SAVINGS $ - $ 94,444 CASHFLOW ACCELERATION $ - $ 2,222,222 CARRYING COST = Receivables X Days Carrying X DISCOUNT = Receivables X Discount Rate X WACC 360 Days Financing 360 CASHFLOW = Reduction in Days Carrying Receivables X ACCELERATION 360
Joining the Program Supplier Agreement Shows basic terms & conditions Addresses protection of licensed materials Covers security information Clearly covers all confidentiality issues Specifies fees and charges (pricing schedule) Have the agreement signed by an authorized signatory who can execute agreements on behalf of your organization Citibank will perform a search to ensure that your UTC receivables are free and clear of all security interests, liens or claims of any kind Supplier Setup Form Asks for principal contact information and user data Determines account requirements Have the form signed by the same authorized representative who signed the Supplier Agreement Bank Supporting Documentation Provides verification of account by supplier Assists with verification process Send to Citibank along with agreement and setup form
Benefits for UTC Suppliers Cost-Saving Tool Reduce your financing and cash applications costs Non-Recourse Payment - Payment to supplier is non-recourse so it is theirs to keep once paid, unlike for factoring arrangements Easy enrollment and No Ongoing Costs - Easy to complete documentation and no implementation or monthly fees Access to faster and cheaper cash - Suppliers are able to generate cash at any time during the payment term Payment Tool Convert approved payments to cash automatically, accelerating receivables Working Capital Benefit - Accelerate cash flow by reducing Accounts Receivables and shortened DSO No Balance Sheet Impact - It is a True Sale so has no impact on Balance sheet, as it is not debt, and thus frees up existing credit lines for the supplier Flexible supplier financing - Suppliers do not have to take early payment but choose only the payments they want to take Information Tool Receive early notification of approved confirmed payments from UTC Provides remittance/financing information for each payment - Either on an invoice by invoice basis or by using the reporting functionality Allows better cash flow planning - Various functionalities to cater for reporting needsreport format (Text or Excel or PDF) Offers visibility of approved payments and their timing - On-demand web access to future cash flows, improving cash forecasting Time Saving - Reduce time spent chasing payments; E-mail notification when payments are approved
Citibank Contacts For questions regarding the Citi Supplier Finance Program for UTC, please contact: Kris Charan Program Manager, Supplier Onboarding Citi Supplier Finance Direct: 1-212-816-5157 Email: kris.charan@citi.com Citi Supplier Finance Toll Free: 1-800-236-1352 For questions regarding the CSF web portal & transactional queries, please contact: Citi Supplier Finance Customer Support Team Email: csfsupport@citi.com Phone: 1-866-834-3048 (Toll Free)
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