Freight News

Supply chain finance for the smaller firm

[ November 27, 2015   //   Chris ]

Insurer AIG and supplier finance specialist Prime Revenue have launched a new supply chain finance offering for mid-market, non-investment grade companies.

Supply Chain Finance from PrimeRevenue and AIG allows suppliers to take early payment less a small discount, while enabling buyers to standardise and potentially lengthen their payment terms. This provides low cost access to working capital on both sides of the transaction, say the partners.

The partners say that until now, supply chain finance has only been available to the largest, investment grade businesses whereas the new product will cater to mid-market, non-investment grade companies, by providing financing with the credit risk insured by AIG’s trade credit insurance.

AIG’s regional manager for EMEA trade credit, Neil Ross commented: “The inability to get access to low cost working capital can affect our clients and is holding back thousands of very well run businesses. Ultimately, it can have a significant impact on the economy as a whole.

“Leading publicly-rated companies can borrow quickly and with favourable terms to take advantage of emergent market opportunities. Now, by combining PrimeRevenue’s market-leading platform with AIG’s Trade Credit underwriting experience we’re able to extend this advantage to many more businesses.”

PrimeRevenue founder, Rob Barnes, Founder, added: “PrimeRevenue has been serving the supply chain finance market for over a decade, with over $120 billion flowing through our system in the last 12 months. We have seen first-hand the benefits that this approach can bring to businesses through unlocking cash flow and working capital to fund day-to-day operations and investment for the future. Our partnership with AIG means that these benefits are now available to a broader market of buyers and their suppliers.”

The offering will be rolled out to other European countries and the US in coming months.

The two partners also unveiled research which shows that limited access to working capital finance and inflexible payment terms are hitting UK business. The YouGov poll of firms providing goods or services to large organisations found that 17% of their revenue is currently tied up in invoices with non-standard payment terms, suggesting that around £29bn is being withheld, UK-wide. Over three quarters of companies have been asked to accept longer payment terms, with 28 per cent saying the problem has worsened in the past year.

Businesses also reported that on average 20% of their customers insist on terms longer than the norm, which in turn affects cash flow and increases administration. But one in five respondents also reported that they had lost business after denying customers longer payment terms.