The supply chain initiative has been suggested to work in the following manner. The large company receives an invoice from its smaller supplier. The large Company notifies its bankers that the debt (invoice) is approved and will be paid as per credit terms (30,60 or 90 days etc.) The Supplier is then able to approach its bank and borrow up to 100% as a cash advance against that invoice value. Thus helping the suppliers cash flow.
I know the Prime Minister is only trying to help, but this exact same product exists already, widely used and has been around for decades. This product is know as Invoice Finance… some may know it as debt factoring or invoice discounting.
This Government initiative just seems like another headline grabbing sound bite. The government really should spend their time concentrating on calming the markets and restoring confidence, reminding people the world will keep on spinning and massive opportunities exist out there.
If you would like to read the more on this article click here. If you would like to know more about existing cash flow finance products including factoring and discounting click here