Corporate Treasury: Funding Working Capital

Commentary

In this second call in our working capital series, we discussed supply chain financing and factoring programmes, and people’s experience with them. These differed significantly.

One of the main takeaways is that, for some companies, managing working capital is a key strategic goal (in our survey of September 2024, 44.6 % said their company has a formal working capital policy): this is reflected in the measurements and tools, which vary to reflect regional differences. Some use working capital financing if it is a cheaper source of funding: they often find it is not - though some find it is. Many participants are interested, but prioritise operational issues, such as improving supplier payment terms or late collections.

Our survey showed a higher level of adoption of receivables financing (factoring, securitisation) at 48%, versus 36% for supplier financing. For future intentions, both solutions were 39% and 41% respectively. The call gave a lot more colour.

Factoring: 

• One participant had implemented a factoring programme. They initially had a poor experience with a fintech, and so moved to a bank solution, the bank offered the same price without a credit wrap. The company views participation in the programme as a way of managing wallet share, and so carefully controls distribution. This works, but it limits the programme size.
• Few others on the call were actively factoring or selling their receivables. Some had discontinued existing receivables programmes, due to cost. This generated a lively discussion: some found the cost attractive, especially if you include other considerations, such as risk mitigation.
• Factors need a lot of