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Lets clean up the confusion around Supply Chain Finance Nomenclature

- August 21, 2014 2:38 AM | Categories: ,

The term supply chain finance is not universally accepted nor well defined. The traditional lending model is starting to give way to supply chain finance with the thought around using various events or triggers in the supply chain to release cash. See – Information Advantaged Finance http://spendmatters.com/tfmatters/information-advantaged-finance/ There are five main triggers that we see for supply chain finance that can involve taking information to trigger liquidity. They are: 1. Purchase order issuance; 2. Materials ordered by supplier 3. Verification of shipping status: 4. Invoice issued 5. Invoice approved From our discussions, no bank, finance house, vendor or logistics company […]

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What the White House and the SEC can do to push SupplierPay

- August 20, 2014 1:55 AM | Categories: ,

With the SupplierPay program, the White House explicitly does not want payment term extension. We can see why that policy standpoint makes sense. Financing for SMEs has not yet recovered from the credit crunch. Securing a bank loan isn’t as difficult for small businesses today as it was during the recession. However, it’s still not as easy as it was prior to the collapse — and that appears to be holding back the broader economic recovery. This is of particular concern to policymakers, since SMEs employ approximately 66% of private sector workers in the United States Today, Johnson and Johnson […]

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Is interest peaking for start-up Supply Chain finance and Payment deals?

- August 19, 2014 2:49 AM | Categories: ,

The recent news of Taulia receiving $27 million in Series D funding, and others in the payment or finance space either being acquired (Demica) or receiving private equity injections (TraxPay) begs the question are we at a peak of interest for finance and payment start-ups? According to the data, it would appear so. Crunchbase reported that venture-based funding rounds to payments companies fell from 59 startups in the third quarter of 2013 to 41 during the second quarter of this year. But on the flip side, there continues to be tremendous interest by private equity and non bank investor people […]

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Do banks have something to fear with Demica and its investment bank partners?

- August 18, 2014 2:46 AM | Categories: ,

123332-c3d90a3dd9413db42544d93a2e5e74d1-medium_jpg The sale of Demica a few weeks back appeared to be purely a sale initiated by J.M. Huber to the investment bankers JRJ Group, TomsCapital and 76 West Holdings. Let’s face it. This could have been PrimeRevenue being taken out by a Hedge Fund run by George Soros with deep pockets. All of a sudden, these vendors would no longer need the banks to fund the assets they generate. The investment bankers now have put one of the critical steps together to create a model to bypass banks and their expensive capital. Having a platform is one critical step, but […]

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Non Banks using Information Advantages to Finance trade credit

- August 13, 2014 4:48 AM | Categories: ,

PatentedAlgorithms2 Networks contain valuable data on the performance history of buyers and their suppliers. Today, most of the financing is done on one event, an approved invoice. Tomorrow, financing could be done based on many events – purchase order, materials ordered, factory about to ship, etc. Funds could be released at certain triggers. Far-fetched? Maybe. But that is where we are moving with many B2B and Supplier Networks that are using the data contained in their network to enable funders to lend money. By using performance history data along with visibility and underwriting models, the market for “information advantaged” finance is […]

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Is trade credit insurance always good value?

- August 12, 2014 4:02 AM | Categories:

This is always a good question for any company to ask with a critical mass of diverse pools of receivables. Of course the answer will depend on what jurisdiction you live in, but it appears we now have more credit risk mitigation choices for both multinational and mid-market companies than ever before. The best thing you can do is find yourself a broker that can educate and orient you to these myriad of changes and then you can make an informed decision. As they say, date your insurer, marry your broker. The best service you can do for your own […]

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Size Doesn’t Matter when it comes to Credit Pricing (in a bank funded world)

- August 11, 2014 3:05 AM | Categories:

My esteemed colleague Pierre Mitchell has been doing a piece on the finance cost to operate a supply chain. He would like to show that small companies pay dearly for finance. I think while intuitively easy to accept the small guy gets stuck with high rates from his banker, the reality is actually based on a few simple facts. First, companies can finance themselves in three ways: Assets – use their receivables, cash, inventory, etc. to obtain funds. Liabilities – companies can issue debt and the interest expense is tax deductible Equity – this is the most expensive, as there […]

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Disruptive Pcard model could drastically increase supplier acceptance

- August 7, 2014 3:20 AM | Categories:

Sellers that accept Pcards can spend millions on interchange costs (ie, the percentage charged by Mastercard/Visa to accept cards). Interchange costs are high to compensate issuing banks, merchant banks, loyalty programs, and of course Mastercard/Visa for use of their network. Ballpark standard interchange rates are in the 250 bps range (or 2.5% for those of you not familiar with basis points). For larger ticket items or merchants with big volumes, interchange would be in the 140 to 150 bps area. Again this is ballpark. But take a large telecom provider that takes cards for both business to business and business […]

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Some suggestions to interpret REL Hackett’s Working Capital data

- August 6, 2014 2:05 AM | Categories:

Once again, REL Hackett has dug through annual reports of Fortune 1000 corporations to analyze and compare Days Inventory Outstanding, Days Payable Outstanding, and Days Sales Outstanding for some of the largest corporations. For Trade Financing Matters, the new US REL Working Capital Survey for 2014 is particularly interesting for how large US companies pay suppliers. REL has seen payables performance declining over the past three years, meaning companies are paying significantly faster, in fact, the average is 32 days (note: this is in line with some of the data I hear from Supplier Networks in terms of their average […]

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International Chamber of Commerce Annual State of Trade Report

- August 5, 2014 2:54 AM | Categories:

iccindex The ICC recently released their Rethinking Trade & Finance report and there is some interesting data inside the 90 pages. The bulk of the information for the report comes from an ICC global trade finance questionnaire that was distributed to the ICC Banking Commission’s 600+ members and institutional partners in 150+ countries. They received 298 replies from 127 countries. It’s an interesting survey, being released as many large global and regional banks now look at their trade finance business more as a specialized lending business and less as a self contained unit. This is particularly the case as more Corporate […]

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Experienced Investment Bankers buy Supply Chain Finance vendor Demica

- August 4, 2014 10:36 AM | Categories:

I wrote a piece recently on Demica wondering why an industrial company like J.M. Huber would want to hold a supply chain finance technology company that was generally irrelevant to the rest of their business.  See Three core Supply Chain Finance solutions from Demica With many in the private equity and investment banking world looking at supply chain finance and early pay opportunities, JRJ Group, TomsCapital and 76 West Holdings have partnered to acquire Demica Ltd., a leading provider of intelligent working capital solutions. What I like about this deal is the backers understand credit, capital markets and banking, having […]

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SWIFT’s Bank Payment Obligation continues to struggle

- August 4, 2014 1:46 AM | Categories:

Andre Casterman, Global Head Corporate and Supply Chain Markets for SWIFT, was kind enough to share some transaction volumes with me regarding SWIFT’s Bank Payment Obligation (“BPO”).  For those of you wondering what the BPO is see – Will SWIFT’s Bank Payment Obligation ever become a real option for corporates? There has been a lot of fanfare and coordination around the establishment of rules to help banks re-intermediate themselves back into international open account trade flows. The BPO is a payment instrument that enables banks to do so and wrap valued added financing services around the instrument, both on a […]

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