Rapid revenue growth – it’s the stuff companies’ dreams are made of. But what happens when you don’t have the working capital available to support your rapid growth? It’s a cash flow challenge not uncommon for today’s companies, especially those in the small and mid-size category (SME).
Just ask Jane Hynes, founder of Kiddyum, a maker of children’s frozen meals based in the UK. While juggling a full-time job and a growing family at home, she started her business in her kitchen. When she pitched her idea to Sainsbury’s – one of the largest supermarket chains in the UK – the retailer took notice. They placed an order for five products to be sold in 330 stores.
It was a pivotal moment for Kiddyum’s history, but not without concerns. The retail industry is known for lengthy supplier payment terms of 60 to 90 days. To meet demand requirements, Kiddyum needed working capital to pay for production, warehousing and distribution costs.
Managing working capital is a challenge familiar to many companies. According to a recent PYMNTS article, the amount of money locked up in unpaid SME invoices in the U.S. equals approximately $825 billion – or 5 percent of the country’s GDP. And it’s a problem that extends across the globe. Regulators in the UK, France, the Netherlands and the US have launched several government-supported initiatives to help smaller suppliers to get paid earlier, have access to financing and inject liquidity into the economy.
For Kiddyum, the solution was Sainsbury’s supply chain finance program powered by PrimeRevenue’s cloud-enabled platform. PrimeRevenue provides the ability for Kiddyum to sell all or some of their approved Sainsbury invoices to a funding source and receive funds the next business day.
Mrs. Hynes calls the Sainsbury’s-PrimeRevenue program “an absolute lifeline” to running and growing her business during a fast-growth period. “I’ve potentially saved tens of thousands of pounds by doing this,” she said.
While supply chain finance enables both large companies and their suppliers to improve cash flow, it’s important to note how transformative it can be for SME suppliers. Access to capital through conventional lending alternatives often comes at a high price. Supply chain finance provides suppliers with an off-balance sheet, immediate and low-cost way to increase cash flow.
For suppliers such as Kiddyum, supply chain finance isn’t just a way to get paid faster; it’s a way to make growth a reality. Thanks in part to Sainsbury’s supply chain finance program, the business is expanding to new markets and customers.
For more information on Kiddyum’s story, check out this article.