SUPPLIER FINANCE UNCHAINED Mitigating your Hidden Risks Louise Beaumont Colin Levins Waldo de Vleeschauwer
True stories
Report published by Zurich • Survey comprised of – Senior Management – 500 UK companies – Five sectors
Zurich Report’s executive summary
Supply Chain disruptions - manufacturing • 70% say healthy suppliers are critical • Only 49% admit their supply chain is reviewed and monitored at board level • 68% confirm up to 10 disruptions in the past year alone • 97% have suffered disruptions at some point in the past • 52% believe supplier bankruptcy is the main cause of disruption • Average disruptions lasts 6 weeks – 60% suffered loss in sales – 54% suffered reputational damage – Costing £230k on average (excluding management time) • 64% indicated greater interest in their supply chain in the next 12 months
So, what can you do? Address the financial well-being of your suppliers Here’s how • The world as your suppliers see it • A revolutionary Supply Chain Finance solution • What are the benefits of Market-Driven SCF solutions? • Who’s providing these solutions? • Who’s using them? • How do they work?
The world as your suppliers see it You’re their cash rich corporate customer
The world as your suppliers see it Saturday, November 30 th Headline Small businesses find loans ‘rarer than diamonds’ Your suppliers are finding it harder to access finance, which means there’s a growing risk in your Supply Chain
Recession: high level consequences • Massive pullback in bank lending • The economy is dislocated – Main indices such as the Dow Jones are at all time highs BUT – These only represent the world’s biggest companies – Zombie companies & Bankruptcies • Unknown to bigger companies, there is a over reliance on fewer, weaker suppliers
A revolutionary Supply Chain Finance solution for you and all your suppliers Market-Driven Solutions Online market places which connect buyers of invoices (Investors), seeking higher yields, to sellers (your suppliers), seeking immediate funding Investors include banks, asset-based lenders, funds and family offices Sellers are suppliers who are looking for alternative finance in difficult economic conditions
A revolutionary Supply Chain Finance solution for you and all your suppliers Andy Davis – the leading AltFin journalist “Markets are inherently more efficient. The market can’t have a concentration risk, so the market can absorb risk that other solutions simply can’t – because they have a single source of finance. Markets, because they have many, many sources of finance, work for more companies, more of the time.”
The benefits of Market-Driven solutions Your Suppliers Your Company On-demand finance No costs (legal, IT, finance, admin) No legal, admin or IT costs Fast to set up - days, not months/years No IT barrier Seen to support suppliers in enhancing their working capital, without lock-ins No lock-ins Effective negotiation tool Multiple sources of capital Competitive advantage Competitive, transparent all-in Option to manage creditor days and finance rate cut your finance costs Flexible – on a per invoice basis Dynamic Discounting, if you want to Reduced admin burden No barriers to entry, no barriers to exit Level playing field across all suppliers
Who is providing these solutions? The Receivables Exchange • US PrimeRevenue • US and Asia Pacific Platform Black • UK
Leveraging commercially-minded investors to deliver SCF for your suppliers Suppliers Investors • • Suppliers are encountering Seeking new ways to make growing liquidity problems decent returns in a low interest rate environment • Business funding shortfall of • £84bn to £191bn predicted by Seeking the security of asset- 2018 based investments in a post-crisis world • More acute as the economy grows In 2012, in the UK, the market for full invoice factoring delivered by banks and ABLs was £254bn – this accounts for 2%-3% of SMEs, which suggests that conventional forms of invoice finance don't suit most of your suppliers.
Scenario 1: End-to-End Supplier Funding A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance Scenario 2: Creditor Day Management A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base Scenario 3: ROI Enhancement A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash
Scenario 1: End-to-End Supplier Funding A large Manufacturer meets the increasing demand for its products while mitigating the risk of supply chain underperformance Challenges Solution Benefits • • • Growth companies rely on Using its strong credit Enhanced supply chain their supply chain to supply profile, the Company helps performance - suppliers are goods on time, on budget its suppliers auction orders well financed and to the correct standard and invoices at 100% of value • Multiple suppliers are able to • Suppliers require payment opt in and out of the • for their own raw materials Investors bid down to lowest programme as and when it possible finance rate suits them • Suppliers are often less • • established with limited PB pays each supplier as Supply chain is well funded - access to working capital soon as the auction closes goods are delivered on-time, on budget and to the correct standard
Scenario 2: Creditor Day Management A large Construction company seeks to better manage its creditor payment days while simultaneously retaining a healthy supplier base Solution Challenges Benefits • The company sends • • Challenging economic Extension of creditor days is Platform Black monthly environment - Company interest-free finance, batches of invoices seeks ways to maximise resulting in net finance cash positions whilst savings • The invoices are auctioned, keeping their suppliers well- after which funds are funded • Enhances working capital transferred to the suppliers management for the • Increase in creditor days has Company • The Company pays its positive effect on net interest invoices on the agreed expense payment dates • Suppliers enjoy early payments - enhancing • The solution is 100% free to supplier relationships the Company
Scenario 3: ROI Enhancement A large Wholesaler wishes to help its suppliers obtain quick finance from its invoices while obtaining an enhanced yield on its cash Challenges Solution Benefits • • Dynamic Discounting – acts • Seeking greater returns on Healthy returns for own excess cash as investor for a % of its own credit risk invoices • • Creditor days > 30, causing Cashflow made available to • supplier working capital Seamless integration with participating suppliers pressures existing IT systems via API • Full financial flexibility for • • No new suppliers not Free for Wholesaler suppliers tendering for business • • Supplier only pays small fee Cost of finance is bid down for traded invoices by competing investors
How market driven SCF works
Q&A November 2013 Winner UK Supply Chain Finance Provider of the Year
UNCHAINED! Louise Beaumont Colin Levins Waldo de Vleeschauwer
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