SUPPLY CHAIN FINANCE

Seven Supply Chain Finance Trends to Watch

David Gustin - March 10, 2015 4:24 AM
Categories: Alternative Finance, Supply Chain Finance | Tags: Marketplace lending, unsecured payable finance

Supply chain finance is all the buzz these days by all vendors wanting to add that killer finance app to their solution.
Certainly, networks, big data, new underwriting models, and non banks are enabling many companies that historically buy and sell to find new ways to finance their trade.
What are some of the trends to watch for in 2015 and 2016:

1. Non-banks have regulatory and compliance advantages over banks, but capacity will continue to exceed flow. Yes, investors are very tired of zero interest rates, negative yields on government bonds, but the hunt for trade receivables to invest has been challenging. Capacity far exceeds flow from many business models, and that will continue to take time to change.   The non banks do have significant regulatory and compliance advantages over banks, and that will not change.
2. Einvoicing, eProcurement and Supplier Network Technology vendors are all adding Phase II financial capabilities. Why not? Transaction revenue is being squeezed, and if you can finance even a small portion of the billions of invoices flowing through your network, good on you.
3. Corporates do not want to be bank to their suppliers – so a hybrid solution is necessary. While everyone talks about all the cash large global companies have, much of this cash is offshore and therefore off limits.
4. Many players are trying to go after the Unsecured Payable Finance. There will be opportunities for those that are smart balance sheet lenders and are willing to take calculated risks.
5. Governments are getting involved to help small business enterprise not be pushed on payment terms, but those initiatives will have limited success. Unless governments provide incentives either through tax breaks, offshore cash repatriation in line with early payment, or what we have argued here at Spend matters and TFM, legislate einvoicing, this will be more moral suasion than anything else.
6. Banks and Tech Vendors are not yet aligned to partner in this space, but that will (may?) change. Sure, we’ve seen many announcements where this bank is reselling this vendors solution or this bank is buying assets from this marketplace lender, but many of the large bank / small vendor dances have yet to bear real fruit. Incentives need to be better aligned, a real challenge for many vendors that have dealt with the slow moving, compliance riddled banks.
7. Collateral lenders like factors and asset based receivable lenders will slowly see their world morph as more take-up of early pay models takes hold.

What do you think? What trends do you see?