All companies need financing, either for investment or as working capital for day-to-day operations. Working capital is used to purchase supplies for production, finance inventory and thus have capital available until customers pay invoices. Therefore, access to appropriate instruments (alternative financing) to manage working capital requirements is key in global efforts to reduce the financial gap between SMEs and large companies.
The Supply Chain Finance (SCF) product has the potential to improve the prospects of many, many companies, especially suppliers, who are held back by the lack of fixed collateral and the limited offerings of traditional credit products that financial institutions have been providing. Due to its unique structure, SCF enables suppliers to larger customers to receive faster payments on invoices generated through a financing facility backed by the strength of the buyer’s business as collateral for the lender. It thus becomes a win-win product for all parties .
But while SCF has gained popularity in many parts of the world (especially in some countries, such as Spain, where it is called Confirming), it is still difficult for financial institutions in many Western European countries to offer these products due to the lack of financial infrastructure, technological capacity and, especially, knowledge, due to an incipient financial culture in this type of alternative financing.
These products allow you to really expand your business and not be so dependent on the date of invoice collection. It is therefore important to make them known, not only by the financial institutions and central banks of the countries, but also by the business associations and organizations that wish to promote and consolidate the business in their geographical area.
Technology companies also have a great responsibility in the evolution of these products: many times, technology is the big stumbling block so that these products cannot be developed in a simple way in the markets where they are really most needed. Alvantia advises and supports banks in the commercialization of these products and, through its innovative technological platform, facilitates access to these alternative forms of financing for their customers.
This is fertile ground for many financial institutions in areas where they need to help companies grow and develop without fear of debt. To support SME financing, financial institutions in the new economies already use partial credit guarantees and at the same time allow traditional credit operations to finance and collect loans. But with products such as Confirming (SCF) it is possible to provide and open financing to many new suppliers, excluded from the traditional system.
Financial institutions could take the lead in launching these products: there are literally trillions of dollars in payment arrears and trillions more in lost opportunities for SMEs around the world in supply and distribution chains; little formal financing is provided except for the largest suppliers (closest to the anchor buyer or seller in the market). This should change and work should be done to expand access to financing for SMEs .
And here technology companies also have an important responsibility, since new technologies make possible the development of an enormous opportunity for new business. Together with development finance institutions, we must make the financial sector more aware of this opportunity and better able to take advantage of it.
Alvantia, thanks to its more than 20 years of experience and with the advantage of knowing the market in all its breadth, will be able to analyze each case and propose the best solution according to the objectives set. Its Supply Chain Finance platform is developed by a team of professionals with extensive business knowledge and experience in the development of trade finance solutions and migration processes. advise you and accompany you throughout the process: from solution scoping to maintenance.
In addition, Alvantia also offers business consulting services and can advise those companies that are starting in the Factoring industry, from a commercial, business, legal and operational point of view.
If you need more information or would like to request a demo, please do not hesitate to contact here with us.
