The last few years have emphasized just how important supply chain finance (SCF) is. If you want a healthy supply chain (and you absolutely should), then your enterprise should offer an SCF program to help its partners access working capital when they’re facing a cash shortage.
The problem is that most SCF programs haven’t kept pace with the needs of businesses today. On the surface, these offerings promise to help suppliers with minimal effort from enterprises. Unfortunately, they often come with restrictions and drawbacks that undermine their usefulness.
Thankfully, there is a new breed of solutions that reimagines how supplier finance should work, delivering real benefits for enterprises and suppliers.
Today’s CFOs should be looking for solutions that offer:
Flexibility in Funding
Traditional SCF programs tend to lock enterprises into a single option for funding. The program is usually run through a single bank or lender that provides the capital to pay an enterprise’s invoices ahead of schedule. Many also limit participation to only the largest suppliers, leaving out smaller companies that may need SCF just as badly.
Additionally, if a single lender loses its appetite for risk, it could either limit or eliminate the SCF program altogether. That can be a huge problem for suppliers that have learned to rely on this funding option. In the most serious cases, it can even be an existential threat.
The new generation of SCF allows enterprises to fund their programs from multiple sources, or even their own balance sheets, and switch between sources quickly. And it can be tailored to allow suppliers of any size to participate. This makes the program more robust and resilient, increasing the likelihood that it’ll be there when you really need it.
Plus, when an enterprise uses its own balance sheet to fund early payment, it can earn greater returns. Suppliers typically grant a discount on a customer’s invoice in exchange for faster payment. When an enterprise is its own funder, it gets to reap the full benefit of that discount and improve key metrics like EBITDA.
Customization and Segmentation
Many existing SCF programs are one-size-fits-all. Each supplier is offered the same terms, with no room for adjustment.
Newer solutions, on the other hand, will offer dynamic discounting, allowing suppliers to offer a discount rate that works for them. These solutions can also support the development of specialty marketplaces where enterprises can offer preferred rates to vulnerable suppliers (such as diverse- or women-owned businesses) or suppliers that meet sustainability milestones.
Excellence in Service
Practically every SCF solution will automate much of its processes so everyone involved saves time. But you don’t want to completely remove the human element. The best programs pair that with speedy customer service and advisory expertise to show you how to use the platform to meet your business goals.
A powerful platform is good, but backing it with human expertise can ensure that you receive your full benefit from your investment in SCF.
What Next-Generation SCF Looks Like in Action
C2FO, the world’s first on-demand platform for working capital, is an excellent example of these new user-first SCF solutions. The company has multiple solutions designed to serve enterprise and supplier businesses by delivering fast, flexible and equitable access to low-cost capital.
By providing vital cash flow when its supply chain needs it, a business will accomplish much more than assisting its suppliers. It will ultimately enhance its own organization’s ability to perform. With a suite of working capital solutions, C2FO is a powerful — and powerfully simple — way to make that possible.