Understanding the Importance of Trade Credit

Trade Credit is something that when it is working well, no one notices, but take it away, and supply chains are disrupted.  In today’s environment of tight credit policies, widening pricing,  changes in banking regulations, etc, corporates, banks and others involved in facilitating credit, whether under the guise of Trade Credit, Trade Finance, Working Capital, Supply Chain Finance, Factoring, Asset Based Lending, etc. need to better understand each other and the changing landscape.

Today, it’s broadly recognized that access to Trade credit has been severely impacted by the Great Financial recession.  This in turn has created new opportunities for innovation.   It is not an exaggeration to say that it is an incredibly exciting time to be working in trade credit, working capital, and payments.  While technology trends such as cloud computing are laying the foundation for innovation, much of this innovation is occurring because the ongoing financial crisis and the challenges in the banking system has led to a desire for a re-invention of financial services.

But the realities are this is complicated, as it touches upon subjects beyond just technology and supply chain, but leads into Credit and Capital Markets.  Someone who has an asset wants to get the least restrictive financing for that asset for the most value.  It is at the point that someone is able to give them value for their asset, whether it’s a loan or a receivable purchase, and it’s the conditionality around that loan or purchase that matter.  There are many techniques to do this and technology is an enabler.  These techniques get turned into Products (ie, Dynamic Discounting or Reverse Factoring, or Vendor Managed Inventory).

Our desire is to help facilitate this process with insightful discussions and research and to be a source of content driven, fact based information dedicated to help corporates, banks and others better understand trade credit issues.

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