Easing your supply chain

Peter Curry considers the benefits to businesses of accessing supplier finance.

Q: What is supplier finance?

A: Any business buying goods and services creates a supply chain leading to an invoice, which will be paid subject to terms. A supplier has to generate the working capital needed to finance this process – either from his own capital or recourse to lending. This will usually utilise limited credit lines and reflect the credit rating of the supplier, who will often have the highest cost of finance in the supply chain. Supplier finance enables buyers to reduce the cost of finance and generate benefits for themselves and their suppliers. This includes having the option to receive payment much earlier in the cycle.

Q: How does this work for a business?

A: All we need is for the buyer to let us know that they have the goods and services, and that the invoice is approved for payment. We then pay the invoice, charging a commission if the supplier opts for early payment, which, in the majority of cases, will be much lower than the current choice of finance being used to fund working capital.

Q: Which businesses are suited to this product?

A: In the UK, businesses from a wide range of sectors are accessing supplier finance, including construction, retail, public sector, manufacturing, broadcasting, and leisure. Any type of company with a reasonable supply chain, which is buying goods and services from other companies, can generate benefits from using the system.

Q: What is Santander's expertise in this area?

A: We have been offering our Supplier Payments product for over 20 years, so have considerable, proven expertise in this area. Supplier finance is a growing market, but with 275,000 companies using our platform on a regular basis globally, it's second nature to us. 

Q: Why is supplier finance in the spotlight?

A: This is a relatively new product to the UK market but is rapidly growing in popularity.  The credit crunch has certainly played a part, given the increasing cost and difficulty of obtaining lending and credit insurance. This has also led to delays before invoices are paid, for SMEs in particular. Supplier finance is valuable at any point in the cycle, but especially so during an economic downturn, when businesses are concerned about the stability of the supply chain.

Q: Is there anything businesses should be aware of?

A: We will advise businesses throughout the process, outlining options and supporting communication with stakeholders. It's not often that a new supply chain finance product comes along that can be a win-win-win for buyer, supplier and financial institution, but Supplier Payments is one such product.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK