Alternative Finance: Market Update [White Paper]
Finance options for sellers have never been more plentiful…or more confusing. A new white paper clarifies how these options work…and how to decide which is right for your business.
If your role in a B2B company is in the procurement or accounts payable function, then you are undoubtedly aware of the significant growth in P2P, e-invoicing, e-procurement, and supplier management solutions. These cloud-based, electronic platforms increase efficiency, decrease costs, and provide companies with the visibility, transparency, data, and analytics they need to better manage spend and working capital.
But if you are on the seller side, solutions that can help contribute to liquidity are not nearly as prevalent or mature in their development. Order-to-cash sellers often find themselves unable to accurately predict when an invoice will be approved and ultimately paid. They rarely have visibility into the buyer’s AP system, unless that buyer has implemented an automation solution with a supplier portal. This has put sellers at a disadvantage when it comes to using technology to gain greater control over cash flow and their own working capital.
Now sellers have their chance.
The marketplace is changing with more options available to sellers; but how do you know which option is best for your business? A Corcentric-sponsored Spend Matters white paper, “Alternative Finance – Market Update, Treasury Considerations” lays out the various ways companies can now elicit funds and how they should assess which options are most advantageous.
David Gustin, Editor and Co-Founder of Trade Financing Matters, is the author of this important document that describes nine different financing techniques and how the size of your company may dictate which technique is right for you.
- Companies with revenues of less than $20 million may best benefit from: merchant cash advances; e-factoring; buyer self-funded dynamic discounting; P2P solutions utilizing third-party capital; alternative marketplace lenders, and p-cards.
- Middle market companies with revenues from $20 million to $2 billion should consider p-cards; supply chain finance and working capital platforms where sellers set their own prices for early payments.
- Large corporations of $1 billion or more should look at supply chain finance and receivable auctions.
What’s the difference between traditional lending and alternative finance?
These recent and growing forms of financing have both pros and cons when compared with traditional lending entities like banks. Here are just a few:
- Secured vs. unsecured – Traditional institutions, like banks will consider and secure the loan based on fixed assets, accounts receivable, and inventory. They will then use traditional methods like factoring, PO financing, and leasing. Alternative financing is entirely unsecured which makes it easier and less complex to attain the capital needed.
- Permanency of capital – Since traditional lending usually necessitates a contract sellers know the capital will be there when they need it. However, sellers must do their due diligence when it comes to selecting an alternative finance provider to ensure that the funds will be there when needed.
- Eligible receivables – Not all receivables are equal when it comes to traditional lenders; some of those receivables may be with companies whose credit ratings are not as reliable as others and are therefore considered ineligible. Alternative finance generally regards all receivables as eligible.
In today’s competitive and constantly changing global market environment, liquidity and the access to that liquidity is more important than ever.
Download the white paper to see more details and discern which form of financing is right for you.