What Is A Supply Chain Finance Agreement

As a result, there is a need for Global Supply Chain Financing (GSCF). The market opportunity for a GSCF is significant. The total global receivables management market is $1.3 trillion. Discounted liabilities and asset-based loans add $100 billion and $340 billion, respectively. Only a small percentage of companies currently use supply chain financing techniques, but more than half have plans or are exploring options to improve supply chain financial techniques. In fact, the supply chain finance market grew 36% in 2016 compared to 2015, reaching $447.8 billion. The amount of funds used at the end of 2016 is estimated at $167.8 billion, an increase of 43%. [3] Market experts estimate that only 10% of the available market worldwide was satisfied with supply chain financing, indicating a significant potential growth market. The market is expected to continue to grow strongly in the coming years at a rate of around 20-30% per year and 10% per year until 2020.

[10] The strongest growth in supply chain financing programs currently comes from the United States and Western Europe. Asia – especially India and China – is considered the market with the greatest potential in the coming years. The driving forces behind the rapid growth of supply chain financing programs are: Some of the products that could be sold under the banner of global supply chain financing include, but are not limited to: 1.) Global Asset-Based Lending (GABL) – Allows mid-sized companies to monetize offshore or in-transit inventory. This results in an increase in liquidity for this category of borrowers, 2.) Inventory Financing – Allows companies that deliver to large buyers to obtain financing for the inventory they need to hold from buyers. This results in an improvement in the net cash conversion cycle for the buyer while providing capital at a reduced rate. 3.) Receivables Management Services – Provides third parties with the outsourcing of the debt management and collection process. It shall also ensure the financing of such claims and guarantees for the payment of such claims. 4.) Liability Discounting – Provides third-party outsourcing of the payable process and leverages a buyer`s credit quality to obtain favorable financing rates for suppliers. This results in lower investment costs for the supplier, part of which can be passed on to the buyer. 5) Insurance – Further reduces business risk through insurance against freight, credit and transaction disputes.

While buyers have traditionally focused on onboarding their 20 or 50 largest suppliers, technology-driven solutions now allow companies to offer supply chain financing to hundreds, thousands, or even tens of thousands of suppliers. This is made possible by user-friendly platforms and streamlined supplier onboarding processes that make it easy for a large number of suppliers to join quickly and with minimal effort. .

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