Large corporates are increasingly leveraging Supply Chain Finance (SCF) as a tool to manage their working capital. Corporate buyers can extend payment terms without adversely affecting the financial stability of their supply chain. Buyers leverage their superior credit rating to extend financing to suppliers. Suppliers receive prompt payment of their goods. 

It makes sense for everyone!

Despite the benefits, SCF programs have almost exclusively remained in the domain of very large companies. The middle market has been neglected! When you look at SCF´s reach into emerging markets, it gets even worse. 

There are a number of reasons why supply chain providers have targeted the largest corporates. Let’s look at just a few.

• Rate arbitrage: investment grade or near investment grade companies have significant financing rate advantages over their suppliers. For mid-market companies this may not always be the case.
• Spend: the larger the company, the bigger the spend, and the more bargaining power it has to push out supplier payment terms.

Then there is the funding hurdle. The mid-market often struggles to secure financing. Large global banks generally have little appetite for smaller programs. Regional banks often lack the technical expertise and automated platform to establish and run such programs. 

So are times changing? How can SCF be extended to the mid-market to bring the benefits to all?

The advent of fintechs, like Finvex,  is promising to change the game. 

Fintech players have enabled a wider range of investors (both bank and non-bank) to fund the mid-market. Diversification of funding sources has helped to counter the lack of appetite we have seen from the largest global banks. 

Fintech-bank partnerships have allowed smaller regional banks to gain the total competency skill set needed to successfully implement and run SCF programs. Fintechs, like Finvex, provide the digital platform and the core competencies, including supplier onboarding and servicing, while the bank provides the funding.

Finvex is committed to moving SCF downstream to the mid-market, helping extend the benefits of SCF to all!