Supply Chain News / Risk & Compliance / Finance & Credit

'Payday Advance' Helps UK Supply Chain Financing

PM David Cameron's SC finance plans for smaller businesses

October 23, 2012
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The British Prime Minister David Cameron is supporting a new supply chain finance plan designed to deliver up to £20 billion in low-cost financing to small businesses.

Under the plan, a bank is notified by a large company that an invoice has been approved for payment; the bank is then able to offer a 100 percent immediate advance to the supplier at lower interest rates, knowing the invoice will be paid.

The Prime Minister met with the leaders of some of the U.K.’s largest companies to discuss the important role they play in supporting their supply chains.

As a result of the discussion, many companies have agreed to boost this support by actively evaluating the implementation of Supply Chain Finance (SCF). The companies, which were already offering the SCF, agreed to continue to do so.

“Boosting the use of supply chain finance is an innovative way to ease the funding squeeze for many smaller businesses, but it is dependent on the nature of individual supply chains to work effectively so is not a one size fits all solution, says Matthew Fell, CBI director for competitive markets. “At the same time larger firms are identifying a variety of different ways to support their supply chains, normally through improved payment terms, direct collaboration and investment. It’s encouraging to see the Government leading from the front by setting up its own supply chain finance scheme for NHS pharmacists.”

This means that leading companies could deliver up to as much as £20 billion (€24.6 billion) of new cheaper finance to their suppliers, including many of the U.K.’s Small and Medium Enterprises (SME).

"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," says Cameron.

The Prime Minister also announced that the Government will look to offer this to its own suppliers. It will start with the first U.K. Government Supply Chain Finance plan for community pharmacies in England. The offer will unlock up to £800 million (€983 million) of new credit for around 4,500 pharmacy businesses, many of which are SMEs.

Recent research by alternative finance provider Platform Black shows that eight out of 10 SMEs found it hard to keep on top of cash-flow in the past year, with most blaming banks' reluctance to offer credit as the main reason for cash shortfalls.

The Government is keen to ensure that SMEs have the widest range of credit options available to them and is taking action on a number of fronts to deliver this. This includes:

  • The Funding for Lending scheme to encourage banks to boost lending in the UK economy;
  • The Enterprise Finance Guarantee – A loan guarantee programme which has helped more than 18,000 small firms obtain bank finance;
  • More than £160m invested in high-growth UK firm through support for the UK Venture Capital industry;
  • Generous tax schemes for people investing in start-ups and growing companies in UK; and,
  • A new £82.5m Start-Up loan programme to help young people start their own businesses.

The following companies have agreed to this commitment: AB Foods; ASDA; Atos; Babcock International; BAE Systems; Balfour Beatty; Boeing; BP; British Airways; BT; Capgemini; Carillion; Centrica; Dell; Diageo; EDF Energy; Finmeccanica; General Dynamics UK; GKN; GSK; Home Retail Group; HP; IBM; J Sainsbury; Jaguar Land Rover; Kingfisher; Lockheed Martin UK; Marks & Spencer; MBDA; O2; Rolls-Royce; Serco; Siemens; Statoil; Tata Steel in Europe; Tesco; Thales; Vodafone.

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