A new report by Demica has revealed that European banks are in danger of losing clients to competitors if they do not start offering a greater range of alternative financing methods.
Over half of corporates from the UK, Germany and France have been approached in the last two years by their current bank’s competitors in an attempt to lure them away with a wider variety of financing options.
Demica found that the rise of credit insurance, credit scarcity and supplier failure plagues European supply chains, and corporates are looking to banks to help them.
Supply chain finance (SCF) is a key area that the report suggests would create a more stable business environment for European corporates, with over half of UK firms admitting to making efforts to extend payment terms with key suppliers.
A much larger proportion, 60% in the UK and 71% in France, believe that some key suppliers cannot sustain further lengthening of payment terms.
Furthermore, the increased cost of credit insurance, which as much as doubled in the most extreme cases, was seen by two-thirds of respondents as introducing significant instability into the supply chain.
“Collaborative financing tools such as SCF have recently generated a high level of interest amongst financial directors and bankers as a way of raising finance to free up working capital,” the report states.
However, only 10% of the 1,500 firms surveyed claimed that they had joined an SCF programme in the last year, and fewer than 30% have been offered SCF solutions by their banks.
European firms that have not taken up SCF programmes could be missing out, as earlier payment in the supply chain and a structure which effectively gives the supplier the lender’s credit rating means that more working capital can be generated.
While most European firms admitted to owing money, over half stated that working capital would be used towards sales growth rather than paying down debt.
Last Updated September 02, 2010
Reader Comments