Easier, speedier access to working capital for SMEs

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Other considerations A supply chain finance program is designed around the buyer’s objectives, whether it’s enterprise development, small business support, assisting suppliers financially, extending payment terms and releasing cash, improving returns on excess cash, reducing cost of goods purchased, improving the accounts payable process and transparency or all of the above. The success of a supply chain finance program is dependent on buyin from key internal stakeholders and it is important to commit the necessary resources to assist us in implementing a successful program. It is important to implement a program like this only once and with the right partner, preferably a multi-bank solution who shares in the same vision and is dedicated to supply chain finance, like E-nnovative Capital. Buyer objectives for supply side ASSIST SUPPLIERS • Improve supplier relationships • Assist suppliers in getting access to capital • Reduce supplier risk regarding cash flow challenges • Alternative income streams WORKING CAPITAL & OPERATIONAL CASH FLOW IMPROVEMENTS • Extend paying terms to some or all suppliers • Maintain existing payment terms if receiving downward pressure on terms from suppliers • Move suppliers off discount terms to net terms • Achieve better returns on idle cash • Move to Open Account & reduce Letters of Credit • Cost of Goods sold reduction In general, it is important that buyers have an efcient invoice matching and accounts payable process before committing to a n ECap program. Late payments of approved invoices could introduce risks, especially when third party financiers are involved. Buyer benefits A buyer -centric supply chain nance program can have benets for the procurement, nance and treasury departments. 1. If buyers want to manage their working capital more aggressively by extending their payment terms (30 to 60 or 90 days for example), then Our platform like this is the ideal way to assist suppliers in meeting their cash flow needs, while maintaining the strength of the supply chain. Extending payment terms frees up cash for the buyer, which can be used to fund expansion and other plans. 2. Supply chain finance is often the cheapest source of funding for suppliers. This can be used as a tool to negotiate better unit prices, bigger supplier discounts and / or other rebates. 3. Move from discount terms to net terms. This removes complexity from supplier negotiations. Contracts can be customized so both parties benefit from the competitive supply chain finance rates. 4. Buyers can choose to self-finance invoices through this platform, in other words become a funder on the platform. If buyers have excess cash at any point in time, they can choose to pay selected supplier invoices early on a n ondisclosed basis. In the process the buyer’s treasury department can significantly enhance returns on excess cash compared to benchmark money market returns, without having to commit to early payment terms on a permanent basis. 5. A platform like this significantly reduces the administrative burden placed on the procurement and finance department. Many suppliers currently sell invoices to debtors discounting companies. These companies continuously contact buyers to confirm the validity and details of invoices. Buyers then have to keep track of the ultimate beneficiary (supplier vs. financier) on an invoice by invoice basis. The E-nnovative platform will keep track of all sold and unsold invoices and the ultimate beneficiaries. On payment date, the platform issues settlement instructions to the buyer’s bank, correctly allocating payments to financiers and suppliers separately. 6. Many overseas suppliers make extensive use of Letters of credit (LCs) as a means of funding. This is very expensive for suppliers and extremely time consuming for buyers and suppliers. A properly structured supply chain nance program can replace letters of credit as the means of finance. This cost saving could be translated into discounts and/ or rebates on purchased goods. Suite A12, Daphton Court, Riverside Drive | P.O. Box 5797 - 00200 Nairobi | t: +254 20 201 4292 e: info@e-nnovativecapital.com | www.e-nnovativecapital.com
Supplier beneits 1. Suppliers can get paid earlier and as a result improve their working capital and inventory turnover. 2. 48 hour financing turnaround times compared to weeks or even months for traditional sources of finance . 3. A multi-funder ECap solution introduces competition which ensures suppliers are getting much better discounting rates compared to both traditional discounting and single-bank solutions. 4. Large suppliers use multi-funder ECap solutions to access additional, competitively priced credit without utilizing existing credit lines or jeopardizing existing bank relationships. 5. Unlike single - bank solutions, there is no need for the supplier to establish a banking relationship with a new bank to access the platform. Financial considerations A supply chain finance program does not change the nature of the commitment or generate any new creditors for the buyer, since one creditor (the supplier) is simply replaced with another (the funder). The only attribute that changes is the name of the creditor. From the financing company’s perspective, all credit lines are uncommitted. As a result this form of funding consumes less capital than traditional lending facilities, especially under new Basel III regulations. This translates into cheaper funding and more benefits to buyers and suppliers. A multi-funder platform makes it possible for various other financial institutions, including development banks , to step in and finance buyer invoices on an uncommitted basis without impacting existing credit lines or banking relationships. Multi-Bank A multi-bank solution offers a number of benets over a single bank solution. • Flexibility of adding funders to the program as individual bank’s liquidity and risk appetite changes. More funders translate into more competitive pricing and greater benets for the buyer and its suppliers. • In most case s buyers have to deal with a variety of banks and factoring companies, acting on behalf of suppliers. A multi-funder platform can avoid conicts of interest as all funders can join our platform. • Large buyers today have supply chains spanning multiple countries. A multi-bank platform provides the scope to fund s uppliers in multiple jurisdictions. We have the ability to leverage more than 40 funders currently on our partner’s platform, funding suppliers in 50 countries worldwide. • Our technology provides the scalability to seamlessly add new funders and thousands of suppliers to the program. All banks and third party nanciers essentially have an equal opportunity to participate as funders on this platform, so no funding institutions are excluded. Suite A12, Daphton Court, Riverside Drive | P.O. Box 5797 - 00200 Nairobi | t: +254 20 201 4292 e: info@e-nnovativecapital.com | www.e-nnovativecapital.com
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Easier, speedier access to working capital for SMEs

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