Beyond the Invoice: Ruminations on the Future of Document-Triggered Financing
From a traditional indirect or even direct materials procurement scenario, these steps make complete sense as potential financing triggers, and they are certainly triggers for payment in the offline factoring world today. It’s likely these triggers – beyond just invoice approval – will begin to come into play in the coming years, especially as supplier networks and related offerings, such as next generation electronic data interchange (EDI) models, become more prevalent.
But if you open your mind a bit to other potential triggers in different areas and scenarios, the prospects become quite interesting indeed. Here are some scenarios I’ve been ruminating on:
- Using operational triggers based on operational and legal frameworks for non-open account trade, such as letters of credit. Tools such as Bolero could make possible such visibility and triggers that would enable new parties – not just banks – as intermediaries or funders. Consider how a buy/sell trading company run by a larger original equipment manufacturer (OEM) might administer such a scheme in a supply chain
- Services procurement financing scenarios, with triggers for early payment and funding such as records from badging or credentialing systems, timesheet submission, deliverable acceptance and others
- Specialized trade financing models that can circumvent inefficiencies in existing markets such as cards being applied to conference and event management payments, where 3% fees can be the norm
- Documentation associated with off-take or future (capacity) agreements with raw material suppliers or basic manufacturers (e.g., plastic injection molding shops, fabricators, machine shops, etc.)
But how and when will such opportunities become available?