Analysis: Supply Chain Finance Holds Steady Amid Rising Interest Rates
tags: Interest Rates, SCF, Supplier, Supply Chain Finance
By 4 minute read• Published August 23, 2022 •
—New eBook from PrimeRevenue Dives Into the Data—
Atlanta (August 23, 2022)—PrimeRevenue, the global leader in working capital and B2B payment solutions, today published its new eBook, Interest Rate Impact on Supplier Early Payment.
“In recent times, cash has been so accessible that many businesses are not prepared to start paying on the debt that they have accumulated. Supply chain finance, which is a more efficient source of cash than debt, provides a much needed buoy in rough economic seas,” said PJ Bain, CEO, PrimeRevenue. “We have found that, from an analysis of customer data, interest rate increases have had zero impact on supplier trading behavior. Early payments have remained steady, at around 75%, despite the base rate fluctuating between 0.1% and 2.75%.”
HOW SUPPLY CHAIN FINANCE WORKS
Supply chain finance (SCF) is a means for buyers to pay their invoices at a later date while still providing faster access to cash for suppliers. A funder typically purchases a buyer’s invoice for a nominal fee, extending the payment term for that buyer while paying the supplier before the invoice’s maturation date. Afterwards, the buyer pays the bank the invoice amount directly.
THE IMPACT OF RISING INTEREST RATES
For businesses, SCF minimizes the impact of heightened interest rates. Trends show that while other financing methods are becoming more expensive, SCF is a mechanism that will hold relatively steady. In fact, access to cash leveraged by supplier finance programs appears to be increasing.
The eBook presents the case study of Electrical Components International (ECI), which, during the credit crisis of 2009, was a major supplier to Whirlpool. ECI couldn’t find funding anywhere else at the time and relied solely on SCF to keep its business from going bankrupt. As credit dries up, PrimeRevenue is observing an increase in businesses successfully leveraging supply chain finance.
Further, the corporate SCF market increased $1.8 trillion globally last year, an increase of 38% compared to 2020, according to an estimate from BCR Publishing Ltd.
Prior to releasing the eBook, PrimeRevenue released its AP Efficiency Calculator, a tool designed to help companies fully understand their annual savings potential from implementing an AP automation solution.
The full eBook can be downloaded here.
PrimeRevenue’s supply chain finance solutions help organizations in 90+ countries optimize their working capital to efficiently fund strategic initiatives, gain a competitive advantage and strengthen relationships throughout the supply chain. As the leading provider of working capital financial technology solutions, PrimeRevenue’s diverse multi-funder platform processes more than USD 300 billion in payment transactions per year. The company is headquartered in Atlanta, with offices in London, Prague, Hong Kong and Melbourne. Additional information about PrimeRevenue can be found at www.primerevenue.com | Twitter: @primerevenue | LinkedIn: www.linkedin.com/