Many suppliers to small and medium sized enterprises (SMEs) are still recovering from the crippling blow dealt to the global financial system a decade ago.
After the Federal Reserve implemented new regulations in 2008, banks tightened lending standards and in turn, large corporations were forced to implement new strategies to improve access to working capital cash trapped in the supply chain.
Ignoring fears of disrupting their supply chain, corporations started extending their days payable outstanding. Before long it had become the new normal.
Converting receivables to cash is one of the largest hurdles for smaller companies looking to cover its day-to-day expenses.
Suppliers waiting to be paid in 60 days have found their days extended even further to 90 days or 120 days with no warning.
“Companies are also leaning on their suppliers” to lower their pricing and accept longer payment terms, says Denise Devitt, VP and senior commercial banker at BMO Harris.
With Paygevity, suppliers avoid expensive factoring arrangements comprised of high interest rate loans, personal guarantees, liens on their account receivables and low loan-to-value (LTV) advance rates.
With Paygevity, suppliers get paid immediately at a low discount.
Benefits to Suppliers
Paygevity’s SCF program benefits suppliers:
- Get paid immediately at low discounts
- The low discount is less expensive than interest charged from a factoring loan arrangement
- Discount primary based on buyer’s strong short term credit profile
- Suppliers gain freedom from a host of high interest rates, liens, and personal guarantees
- Supplier participation is 100% voluntary
- At opt-in, suppliers maintain option to accelerate payment on a portion, all, or none of their invoices
Paygevity’s SCF program allows suppliers immediate access to their cash at only a small discount, even if corporate buyers extend their days payable.
Paygevity is committed to fostering growth and innovation to suppliers as well as large corporations.
Authored by: Dr. Gerrit Kuijt, PhD, M.D.
Dr. Kuijt serves as Paygevity’s Chief Business Development Officer and leads the corporation’s strategic growth initiatives globally. Concurrently, he is completing an Applied Economics PhD (his second PhD) at Antwerp Management School. Prior to joining Paygevity, Dr. Kuijt served as Vice President of Business Development and Chief Medical Officer at Avant-garde Health. A former military surgeon and Lieutenant Colonel in the Royal Dutch Army Reserves, Dr. Kuijt attended Valparaiso University where he studied physics—ultimately earning his medical degree from Erasmus University and a PhD in Clinical Medicine from Maastricht University. Dr. Kuijt is a graduate of Harvard Business School’s Program for Leadership Development—an accelerated alternative to an executive MBA designed for specialists and star contributors.