Removing Lien Obstacles from Supplier Chain Finance

Many people look at supply chain finance and wonder how a supplier wouldn’t want to participate to gain cash flow visibility and on-demand early payment capability. Indeed, most supply chain finance programs do not involve any supplier sign-up costs, rather, suppliers only pay fees if they choose to receive early payment. On the technology side, it couldn’t be simpler as the only technology requirements are an internet connection and a web browser. That said, there are credible reasons why suppliers would choose not to participate in supply chain finance programs and one of the biggest is the level of restrictions placed on suppliers by their existing lenders.

Many suppliers who could gain the most from supply chain finance have some sort of asset based financing in place, from Asset Based Loans to factoring programs. This means that the supplier’s existing lenders will have placed liens on their receivables making which in turn make them ineligible for sale.

Since nearly all bank-funded supply chain finance programs facilitate early payment through the sale of receivables, suppliers utilizing asset-based financing may not be able to participate in supply chain finance unless either

1. they get the liens on their receivables released or
2. the supply chain finance program facilitates early payment through a mechanism other than the sale of receivables. The lien release process can be painful at best and prohibitive at worst as it requires that the supplier’s existing lender release the liens, which can add significant time to the supplier enablement process. It is important to note however that this is a US-based issue as the Uniform Commercial Code (UCC) governs the sale of receivables. Liens are not a meaningful impediment to supply chain finance adoption outside of the US.

PrimeRevenue recognized that liens were a consistent roadblock to onboarding suppliers, significantly restricting the speed of supplier onboarding. In order to meet these challenges, PrimeRevenue developed and introduced Electronic Trade Drafts.  This patent pending tool allows banks to purchase a trade draft from the PrimeRevenue platform without the requirements of lien searches and release issues. This dramatically expands the number of suppliers who can come onboard and speeds the onboarding process. PrimeRevenue is the only supply chain finance provider worldwide to offer this solution, adding significant value for the buyer and its suppliers and further solidifying PrimeRevenue as the chief innovator in supply chain solutions.