Following the news that the ACCC has launched an investigation into the finance model, a supply chain finance specialist has rejected claims that reverse factoring is an invalid and risky form of business finance.
Drawing from its experience of having underwritten business in excess of $1b over the past seven years, Melbourne-based Fifo Capital estimates supply chain finance will help underwrite the majority of SME enterprises in the coming five years.
“Supply chain finance is a product of today, releasing liquidity for millions of small companies and underwriting risk in a new and innovate way. It’s time for a re-think,” said Fifo Capital CEO Wayne Morris.
Morris joined Fifo Capital after having established supply chain finance and invoice finance fintech models for leading European brands such as Jaguar, Land Rover and EDF Energy. Given his extensive experience, the CEO feels strongly the model should be seen as a stimulant for SMEs rather than a risk.
He explained, “Financial products are developed because supply chains are becoming increasingly complex. Businesses aren’t confined to the factory gates anymore, rather they’re dependent on a network of suppliers and partners to come together in a tight, working collaboration.
“Put simply, cash is the glue that holds supply chains together and supply chain finance is best used to help avoid small businesses waiting around to be paid by big business.”
Fifo Capital’s model of paying suppliers invoices early for a fee is on the rise in Australia, following the trends already evidenced in the UK.
The company currently has over 3,000 businesses on their books, with supply chain finance accounting for hundreds of those, with a specialty in SMEs in construction, manufacturing, labour hire and importer/wholesalers.
According to Morris, supply chain finance is a “proven and strong” financial instrument, best utilised when it’s able to cascade down multiple levels of the supply chain so the burden and benefit of liquidity can be shared throughout.