Corcentric’s Cloud Solution Offers New Model for Distributor Finance

At one point in time, GE’s Commercial Distribution Finance Corporation  provided $30 billion in annual inventory financing to the technology, electronics and appliances, powersport, marine, RV and the lawn and garden industries. Customers included the likes of Dell, Whirlpool, Polaris and Brunswick.

That business has been sold to Wells Fargo as part of GE’s downsizing of third-party lending (and exiting its bank status).

These inventory financing and term extension models generally worked whereby a OEM receives 100% payment via the purchase or discounting of its distributors’ receivables. The OEM is paid immediately upon shipment of goods to the dealer, and the dealers pay the lender directly when goods are sold. The second technique involves the provision of direct loans and credit facilities to distributors, backed by varying levels of support and involvement by the corporate OEM. These facilities are typically used for financing inventory and receivables.

Here is an example of that model today, using Wells Fargo’s flow as an example:

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These models are useful for channel partner financing, extending terms and large purchase order financing.

But Trade Financing Maters sees a large opportunity for connected, seller-centric platforms to facilitate data and document flow in OEM dealer/vendor/distributor and GPO structures.

Unlike the two forms of distributor finance mentioned above, there is great potential for cloud-based e-commerce platforms to leverage a seller-centric version of distributor finance. In this arrangement, the OEM functions as the “middle party” working with its dealer/vendor/distributor network and its national account customers to manage invoicing, matching, price validation, dispute management, credit and collections, payments to its dealers and collecting receivables from national account customers. Third-party providers may offer risk management or logistics support to broaden such a solution.

Click here to download the white paper Distributor Finance – A New Take on an Untapped Market

 

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