Trade Services
Supply chain financing and SMEs
For more than 20 years, Banco Santander has provided reverse factoring or Confirming to buyers and suppliers across Latin America. César Quintana, head, global sales, Supply Chain Finance, Banco Santander talks to financial-i about whether supply chain financing, really addresses the financing needs of small-to-medium-sized (SME)suppliers.
It is to the extent that the bank will tie up the risk in the most efficient manner, and hence be able to offer fully non-recourse financing to the supplier and at the same time be aggressive in pricing.
To what extent do banks have the risk appetite and the know how to drill deeper into the supply chain and provide financing solutions for the second and third tier of the supply chain - supplier's suppliers and distributors?
SCF solutions are typically purchaser oriented. There is always a purchaser within each supplier, so in principal, the product is applicable to the entire supply chain. The bottom line is whether the purchaser is perceived to be strong enough to meet its obligations at maturity.
What industries and regions is SCF most popular?
SCF has historically been more popular in Southern Europe, particularly in Spain, where Banco Santander originated it in the first place. A good reason being that payment terms tend to be longer in countries like Spain or Italy (90, 120 days on average). The longer the payment terms, the more incentive on discounting.
How affordable are SCF solutions for SMEs?
Pricing sits on a comfortable ground between the one reflected by the credit profile of the purchaser and the one reflected by the credit profile of the supplier. Pricing must be interesting to suppliers otherwise, neither the bank nor the purchaser ultimately gain anything.
Do you provide other forms of SCF such as inventory or pre-shipment financing or distributor financing?
We do provide pre-shipment, inventory, payable and receivable financing in various forms and shapes.
To what extent are buyer organisations willing to help their suppliers get better financing terms?
There is always a component of that when a purchaser decides to enter into such a program, but it is rarely the only reason. Typically, buyers will ask their suppliers to accept an extension of payment terms in exchange of allowing access to this sort of financing.
Date Posted:9th August 2010