I believe 2017 will be known as the year when supply chain finance finally stepped out of the wings and into the spotlight – not only as a way to improve cash flow, but also as a key enabler of transformation. It’s impossible to ignore the transformations happening in virtually every industry, from automotive and food to retail and energy (and beyond). Business as we know it is changing. And those changes demand capital.
PrimeRevenue is meeting that demand. In 2017, more than 400 organizations chose PrimeRevenue as their multi-funder supply chain finance partner. We added thousands of new suppliers to the PrimeRevenue platform. Today, we process at least $180 billion in payment transactions per year and have more than 27,000 suppliers on our platform and more than 55 funders in over 70 countries.
So, what’s next? Where do we go from here?
Basketball legend Michael Jordan put it aptly when he said: “Earn your leadership every day.” For PrimeRevenue, that means more than just growing financially. In 2018, it means bringing the power of supply chain finance to more companies and their suppliers – particularly those in the mid-market.
It’s important to note that the term “mid-market” covers a lot of ground – anywhere from $100M to $2B by some definitions. By and large, these companies are hungry for growth but struggle to access the large sums of capital required to tackle transformation initiatives that will help grow their business.
Historically, funders have viewed mid-market companies as a risk when compared to their enterprise counterparts. This presents a serious challenge for, let’s say, a $400M business looking to become a $1B company in today’s business environment. Whereas an enterprise-size company may have the cash to grow through expansion or acquisition, businesses in the mid-market must borrow (typically at higher interest rates) thereby driving them further into debt and, in turn, limiting their operational agility.
This points to one of the reasons that medium-sized businesses have traditionally been underserved by supply chain finance providers. Many providers rely on a single source of funding that isn’t motivated to do business with companies that are privately owned, unrated and/or sub-investment grade. Others simply don’t view it as a profitable market.
Another reason is mid-sized companies often do business with fewer and smaller suppliers. Buyer/supplier transactions also tend to be smaller in size and volume. A supply chain finance program serving a mid-sized business is typically smaller than one serving an enterprise-sized company. (Quick aside: some medium-sized businesses work with giant suppliers. In these cases, the business doesn’t always have the leverage to negotiate payment terms. Supply chain finance can be instrumental in providing this leverage!)
But the fact remains that a majority of growing mid-market companies are looking to invest capital to add jobs, upgrade infrastructure or make acquisitions. Seventy percent, according to the National Center for the Middle Market’s 3Q 2017 Middle Market Indicator study. So how do these companies overcome the size and risk factor to get the cash they need to grow and transform their business?
At PrimeRevenue, we see this challenge as an opportunity – something our client roster can already attest to. But serving medium-sized businesses isn’t a natural fit for every supply chain finance provider. It requires unique operational capabilities and scalability.
Diversity in funding sources is key. Because we have the largest pool of funders of any SCF provider, we are not saddled with the restrictions that a typical bank-led or smaller provider would have. This enables PrimeRevenue to provide more companies with access to a more diverse pool of funders to suit our clients’ needs. In order to expand our supply chain finance solutions to better support businesses below the $2B mark, we are increasing the total amount of funders on our platform to over 70 with the addition of several new regional and community banks this year.
Extending the power of supply chain finance deeper into the mid-market is something we’re very excited to accomplish in 2018. It’s just one way that we continue to earn our leadership every day.
Published January 31, 2018