This is a guest post by Alex Lomas, Director of Reformation Logistics. In the below blog, Alex shares his experience with supply chain finance and how it helped him and his co-director start a new business in the midst of a global pandemic.
In my 16 years in the commercial logistics industry – several of them on the owner/operator side – I’ve come to understand firsthand how early payment can provide a precious financial advantage to a growing company. But in the last year, that understanding took on new meaning as my business partners and I did the unthinkable. We launched a business during a pandemic. And it wouldn’t have been possible without PrimeRevenue.
Like many businesses, ours was borne from our experience working with another venture – in this case, another freight transport services provider. Growing that company had been a fairly standard affair from an operations perspective. We grew our business month-by-month, truck-by-truck as cash flow allowed. When one of our customers, DFDS, launched a supply chain finance programme with PrimeRevenue, we were eager to participate. Better cash flow opened doors for us to grow the business.
Launching Reformation Logistics when and how we did was an ambitious endeavor. We were fortunate in that we were able to secure a large multi-national logistics company as one of our inaugural customers. But, unlike our experience in the previous operation, we needed to grow our infrastructure all at once to meet customer demand. A slow, linear ramp-up wouldn’t do. We needed 10 trucks on the ground on day one. That was challenge number one.
Challenge number two was the commercial banking climate in the UK. Whilst the logistics industry has fared rather well during the pandemic, commercial banking has been overwhelmed. Here in the UK, like elsewhere, many banks have been consumed by administering bounce back relief programmes to small businesses. That’s great if you’re an established business – not so much if you’re a trying to get a new business off the ground. There isn’t a strong focus on new business lending, which was a problem for us.
To secure and maintain our operators’ license, we needed to keep a certain amount of funds in our bank account at all times. We had this covered. But this lump of money, which would otherwise be spent on building up our fleet, was effectively untouchable. Early on, we realised we needed another avenue to help us with startup costs.
Positive cash flow on day one
When we were looking at breaking away from the old business and starting a new venture, we knew the only way to make it happen was to participate in DFDS’s PrimeRevenue-led supply chain finance programme. We needed positive cash flow on day one and early payment could give us that.
We approached PrimeRevenue outright about participating in the early payment programme. We hadn’t yet been approved as a supplier, but the team at PrimeRevenue did the legwork for us and ushered us through the approval process. In fact, I was setting our business up with PrimeRevenue even before our operator’s license was fully granted.
They also helped us spot and tackle an unexpected roadblock, which could have been disastrous for us. Just two weeks before going live, we discovered our bank couldn’t provide us with an international bank account number (IBAN), which we needed to process cross-border transactions. Talk about a moment of anxiety – we had already purchased £10,000 in fuel and here we were unsure if we could process our first payment. Thankfully, PrimeRevenue helped us find other options and we were able to secure an IBAN.
Fueling our ambition one early payment at a time
It’s impossible for me to overstate how important supply chain finance is to Reformation Logistics. Our business plan is fundamentally linked to PrimeRevenue. In the first six months, we accelerated payment on £565K in invoices. We were able to access the funding we needed to invest in our fleet whilst retaining what we needed to show in the bank. Smoother cash flow has been vital in helping us grow. We’ve set it up so that every invoice we submit to our customer is automatically traded for early payment. Today, we’ve grown our operations to include 20 trucks, 25 drivers, and 5 staff.
As a business owner, the advantages of supply chain finance are irrefutable. It’s a better alternative than other early payment schemes that tend to be more costly for suppliers and less beneficial to the buyer.
Why share our story? We feel like we owe it to other businesses out there to share how important supply chain finance has been to our success, and how they could use it to their own advantage. The platform gives us visibility into invoice status with our customer so there are no more guessing games as to whether an invoice has been approved or when we are expected to receive payment. We also have enhanced flexibility to advance payment when we need it and take control of our cash flow. That is key to a growing a new company, and PrimeRevenue has been the right supply chain finance partner to truly change the trajectory of our business.
My business partners and I wanted to start a logistics company that matched our values and ethics – a place where there was mutual respect between management, employees, and customers. PrimeRevenue helped us make our ambition a reality.
Watch this short video to learn more about the DFDS supply chain finance program.