Analysis: Supply Chain Finance Holds Steady Amid Rising Interest Rates
By 4 minute read• Published August 23, 2022 •
—New eBook from PrimeRevenue Dives Into the Data—
“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 SCF 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.
As a pioneer in global B2B payments, the PrimeRevenue platform connects the entire supply chain by improving working capital and automating digital paymenlop;ts. Thousands of companies around the world leverage one streamlined platform to increase payment visibility, enhance control, and improve cash flow. PrimeRevenue is headquartered in Atlanta, with offices in London, Prague, Hong Kong, and Melbourne. Learn more at www.primerevenue.com and connect with us on Twitter @primerevenue and LinkedIn https://www.linkedin.com/company/primerevenue/.