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Deferred Buyer Payment Solutions: The Search for the Holy Grail

David Gustin is the chief strategy officer for The Interface Financial Group responsible for digital supply chain finance and is a contributing author to Trade Financing Matters.

Most discussions about early payment solutions focus on buyer-centric models, ones that scale by bringing technology, managed services and perhaps some underwriting to offer supplier finance. This is a big opportunity that top providers have been going after for years, of course, and the potential market is huge. But the flip side of the coin, deferred payment solutions, where sellers are paid early (or based on their standard terms) and small buyers can extend those terms outward to 90 or 180 days, is a less understood market — both in terms of potential, technologies and the type of underwriting to manage losses.

Ad Hoc Working Capital and the Diversification of Liquidity

Toyota supply chain

When it comes to working capital and liquidity today, there are more options than just black. Almost all companies have some form of permanent capital to fund their business operations. Even the smallest companies typically have an overdraft facility or business line of credit with their bank. Larger companies are serviced by an array of conventional (banks, factors, ABL) and non-conventional (asset managers, insurers, specialty finance) financial firms. Until recently, however, the idea of ad hoc working capital to supplement more permanent forms was not a reality, since the combination of technologies such as e-invoicing, dynamic discounting, API integration and supplier portals were being developed along with third-party sources of capital. But through rapid B2B digitization and more widespread deployment of purchase-to-pay and supply chain collaboration platforms, companies now interact with their buyer-supplier ecosystems in new ways that enable and simplify ad hoc working capital.

Post-Confirmation Dilution in an Uncertain Credit World

e-invoicing

How long has this benign credit cycle been going on? How about since 2008, when the Fed began dumping money into the economy to go way beyond its mandate as a last-stop liquidity gap. This has led to many distortions in the credit and capital markets, and one area where this is poorly understood is around “approved” invoices. Despite what many players in the space might believe, underwriting is necessary — even  critical. Even though the invoices that are on the platform are, by definition, approved for payment (i.e., highly de-risked), they are by no means risk-free.

Early Pay Finance Ain’t Easy: Understanding Customer Deductions

Every industry is affected by customer deductions. Called a variety of names by companies — including deductions, chargebacks or short-pays — from the perspective of a digital lender focused on invoice finance, understanding the nature of deductions is a first start to building smart underwriting and dynamic lending capabilities. Why? Deductions mean a diluted invoice value.

Fintech or House Bank for Early Payment Solutions: Key Differences

There are three buyer-centric solutions to facilitate early payment for suppliers: supply chain finance, dynamic discounting and commercial cards (p-cards, v-cards). Bank-developed solutions in this space rely heavily on companies using credit lines. The focal point tends to be on p-card solutions, not dynamic discounting. Why? P-cards generate much more in fee revenue than dynamic discounting, particularly if a client uses its own funds to facilitate early payment instead of a bank credit line.