UPS Capital and Finance – closed loop and focused on SMEs

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I recently heard Ron Chang, new head of UPS Capital, speak about what their three main areas are in regards to supply chain finance.  Few people know that UPS bought a bank back in 2001, First International Bancorp, and got into the factoring business.

Ron said UPS focuses on three main areas of finance:

  1. Provide in transit cargo insurance (not sure how that leads to cash)
  2. Cross border Asset Based Lending
  3. Merchant services – Cash on Delivery

UPS is the only logistics company that is involved in finance, so I was interested in what Ron had to say.  They offer two finance products – Cargo Finance and Asset Based Lending (ABL)

  • Cargo Finance is a way of allowing SMEs to have open terms with suppliers when they conduct cross border trade.  Suppliers are paid upon shipment, and buyers must pay before goods delivered. Cargo Finance is targeted at SMEs and is a substitute for them having to issue Letters of Credit (capital intensive and hard to get).
  • Global Asset Based Lending. When a U.S. based customer has internationally located inventory, UPS Capital is able to lend against that inventory, if the inventory is positioned in a UPS distribution center, or is in transit using UPS transportation capabilities. UPS’s control of the goods and visibility enables the facilitation of funds when other lenders cannot.

UPS only plays where their clients are using UPS assets to move goods (warehouses, trucks, carriers, etc).

When I last checked with my UPS contacts, the book of business for the above products was still relatively small.  UPS certainly has something that could be monetized for the market, they are long on information – collateral, pending orders, pending receipts, etc. but to date have focused on their closed loop system. In addition, finance is not UPS’s main business; moving boxes is.

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