As companies push out their payables – some as far as 180 days – they are offering vendors a way to get their money earlier called supply-chain financing.
How it works:
- The vendor sends a bill
- The customer approves it
- A bank then offers terms something like:
- We’ll pay now and charge Libor (or its replacement) PLUS some markup
- We’ll pay you 100% at 180 days
As a side, New Zealand is working oil as a law that prevents large customers from stretching payments beyond 30 days. I am all for that!
Recognizing a need to reduce its environmental footprint, Walmart has extended supply chain financing to include helping “smaller suppliers” get special financing for sustainability efforts. These small suppliers need a lot of cash to reach “net zero.” Stay tuned!