“We have companies that are enhancing their balance sheet cash to support acquisition strategy,” continued Riddle. “And there is a supplier component where they really are the ones that feel the pain. Downstream in the supply chain, the smaller mid-sized enterprises are the ones that really struggle for capital. Their cost of capital has gotten to a point where it makes the supply chain finance model very attractive, since typically the discount program or the cost of the capital that comes to the small or mid-sized enterprise in the form of SCF, comes at a far lower rate than the cost of borrowing themselves from traditional debt vehicles. The awareness created a focus on supply chain finance. It’s a ‘must be considered tool’ to help manage the overall working capital picture by corporate treasurers,” Riddle explained.
But it’s not just the corporate treasurers that are involved. Fixed income managers, hedge funds and other entities outside of banks are also adopters of supply chain finance assets off such SCF platforms. And for a service provider like PrimeRevenue, this is key as the company works to provide the network and technology capabilities to connect the buyer, supplier and funding institution.
The tools and the strategies for the optimization of cash flow and credit lines do exist. And the momentum of its adoption by financial institutions combined with key players in the supply chain will only continue to increase as questions regarding liquidity, availability and flexibility are addressed in the global economy’s recovery.