Abstract
SCF is a direct response to an evolving situation of the global trade conditions and offers an alternative solution for financing businesses, which generates liquidity and improves working capital. Instruments such as reverse factoring and reverse securitisation are a perfect example of a win-win situation between buyers, suppliers and banks. The principal barriers are represented by the burdens of KYC requirements and the accounting treatments.
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Notes
- 1.
Working capital (WC) represents the amount of day-by-day operating liquidity available to a business and is calculated as: WC = (AR) + (Inv.) + (Cash) − (AP), where (AP) stands for accounts receivable, (Inv.) is the inventory value (raw material + Work in Progress (WIP) + finished goods), (AP) is accounts payables and (Cash) is self-explanatory.
- 2.
A McKinsey study (2015) estimated that 10–15% of the SCF market now involves fin-techs, and their growth is likely to accelerate.
- 3.
It is important to note that only eligible payables can be financed, submitted to a series of decisional constraints. For example, payables must be free from any liens or security interests and not have been previously pledged or sold (Alite Group 2014, p. 10).
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Hofmann, E., Strewe, U., Bosia, N. (2018). Background I—What Is Buyer-Led Supply Chain Finance?. In: Supply Chain Finance and Blockchain Technology. SpringerBriefs in Finance. Springer, Cham. https://doi.org/10.1007/978-3-319-62371-9_2
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