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Payables Finance

This solution allows corporates to extend funding to their suppliers at favourable rates through the discount of their own receivables. This may enable buyers to extend payment terms on their payables, unlocking working capital for redeployment into other corporate initiatives.

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How does it work?

A payables finance structure establishes a tripartite arrangement between a corporate, supplier and funder. The funder will typically contract to purchase receivables generated by the supplier upon confirmation of the sale to the buyer. By keeping the relationship between supplier and funder independent and managed through the platform, any payable may be classified for accounting purposes as trade debt as opposed to an on-balance sheet finance obligation.

Benefits

Improve payment terms and increase DPO

Increase cash flow

Accelerate collection of receivables

Access to alternative competitive funding

Generate fees based on the discount

Finance irrevocable payment undertaking

Success factors

A Payables finance structure, subject to auditor review, should be measured by the ability of the buyer to renegotiate payment terms without affecting the accounting classification and will also be related to helping suppliers to access to cheaper alternative liquidity and allow the funder to provide funding on a single obligor risk through uncommitted facilities.

Voluntary participation

Supplier participation should be voluntary, and the programme should be transparent to the market

Standard payment terms

Supplier payment terms should be in line with industry standards

Uncommitted funding

Funding lines should be uncommitted in nature and buyers should refrain from bearing the invoice discount cost or receiving cash rebates