Supply Chain Finance Scheme to be discussed by Prime Minister David Cameron, whereby he will tell leading UK businesses help is at hand to improve cash flow within their supply chain via the utilisation of the new finance scheme.
Which has the potential to see 20 billion pounds in funding being released more quickly to businesses? He will attend a roundtable event in London to try to convince the major players in the United Kingdom’s economy to follow in the footsteps of the likes of Vodafone and Rolls-Royce and help improve suppliers’ access to finance.
Through the Supply Chain Finance Scheme, companies agree to notify a bank as soon as an invoice is approved, which then enables suppliers to immediate access to a low-interest loan from their bank whilst the amount waits to be received.
Cameron said: “This government is determined to back all those businesses that aspire to get ahead and take on more people. In the current climate, viable businesses can struggle to get the finance they need to grow. This scheme will not only help them secure finance and support cash flow but will help secure supply chains for some of our biggest companies and protect thousands of jobs.”
According to the government, the new finance scheme will deliver a wide range of benefits to suppliers of participating companies. These include cheap funding based on the credit quality of their customers and efficiency savings generated by a reduction in the cost financing. Crucially, the scheme will see 100 per cent of the invoice value made available to suppliers in advance of it being paid.
Currently, invoice-financing schemes are available but only pay between 70-90 per cent of the value to suppliers.
John Walker, national chairman of the Federation of Small Businesses, said: “The new Supply Chain Finance Scheme could help smaller firms in two key areas – improving their working capital and tackling issues of late payments. Nearly three-quarters of small businesses report that they have been paid late in the past year, placing a huge strain on cash flow and meaning they struggle to realise ambitions to grow.”
CIPS CEO David Noble said: “Many businesses recognise the importance of their supply chain and therefore invest time and energy into developing those relationships. They benefit by being regarded as a ‘preferred customer’ by their suppliers and in the process, secure a competitive advantage. Those that don’t value their supply chain in this way will undoubtedly find it difficult to diversify their supply base when they need to.”