UPS Capital – still mostly a Packaging Company

UPS Capital, a subsidiary of UPS, provides insurance, financing and payment services that are unique, relevant and competitive. I have heard UPS Capital, which is part of the Supply Chain business, talk about trade finance for over ten years.

UPS touts themselves as the only logistics company in the world that offers a broad, in-house financial and insurance solution for customers.   Few people know that UPS bought a bank back in 2001, First International Bancorp, and got into the factoring business. Today, they focus on three main areas of finance:

  1. Provide in transit cargo insurance
  2. Cross border Global Asset Based Lending
  3. Merchant services – Cash on Delivery


So after all these years, how does UPS Capital stack up? While UPS recent fiscal year saw $58 billion in revenue, UPS Capital is far less than 1% of that revenue. For all the hype, they are still a package company.

One of the unique products offered by UPS Capital is Global Asset Based Lending.   When a U.S. based customer has internationally located inventory (owned, operated or managed by UPS), 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 Capital Global Asset-Basesd Lending Model


Global Asset-Based Lending from UPS Capital enables the borrowing base to increase because advances can be made against foreign receivables. If a firm has $5M of inventory located in the USA, and $5M in non US locations, many financial institutions would calculate the total availability of funds to be $5m and provide an advance rate of 70% or $3.5m. With UPS, the US and non US inventory would be included, so the advance rate would be $10M x 70% or $7 million.

Of course, this is all with the caveat of using UPS freight forwarding, customs brokerage and warehousing services.

I can understand why UPS does not want to grow this business too much. While they have ample available credit (they are authorized to borrow up to $10 billion under their U.S. commercial paper program and have two credit agreements with a consortium of banks), they are not a bank, and do not have the leverage banks have or access to cheap deposits.

Finance has been and appears to always be a complement to what they do, not core.

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