Imported from the Anglo-Saxon business environment under the name of supply chain finance (SCF), supply chain finance is a relatively new practice in Spain, but it is increasingly gaining ground in the mid cap segment, together with other alternative financing methods such as factoring and confirming.
It allows companies to optimise payment to their suppliers through financial technology tools, ad hoc digital platforms that allow the buyer to offer a financing option to their suppliers, who can manage and advance the collection of their invoices.
The advantages of this type of financing are obvious. The purchasing company, in addition to obtaining an improvement in working capital, is able to offer financing capacity directly to its suppliers, thus improving its payment planning. As for the supplier, it obtains a digital tool that allows it to easily consult the status of the processing of its invoices and to manage the financing of the same personally in a much more agile and intuitive way.
SCF solutions are part of a new generation of financial services characterised by the use of the latest technological innovations. Where once companies could only rely on the know-how of traditional managers to obtain financing or better business management, there are now all kinds of tools that complement and improve these services through technologies such as big data, artificial intelligence and blockchain.
These tools have made a difference during the COVID pandemic, which put a strain on many companies' supply chains due to global trade restructuring, sanitary restrictions and bottlenecks in the flow of goods. According to a study by S&P Global Market, profits in the SCF sector grew by 4% during 2020, with the European and US markets particularly strong.
Thanks to IT-based solutions, alternative institutions are challenging traditional banks for dominance in global supply chain finance, as more and more companies opt for the flexibility and customisation that services such as dynamic discounting or peer-to-peer lending allow. As a result, this smart financing modality is expected to continue to grow in the near future, integrating into the supply chains of medium-sized companies and pushing traditional banks to adapt to the ongoing digital revolution in the financial sector.
