Britain launches SCF initiative
UK prime minister David Cameron has launched an initiative designed to release billions of pounds in supply chain finance (SCF) for UK SMEs.
Cameron described the initiative as “win-win”: small companies will have access to cash flow quicker – he hopes that up to £20bn of cheaper finance will be available – while large corporates will have a more reliable supply chain, with less likelihood of suppliers going bust.
At a Downing Street meeting this week, Cameron persuaded 38 FTSE 100 companies to evaluate the scheme, which the government has billed “supply chain finance”, while big names like Rolls Royce, Tesco and Vodafone have already signed up.
Under the arrangement, when large companies have approved an invoice for payment, they will notify their supplier’s bank, whichwill then be able to release a 100% loan at lower interest rates.
Simon Enticknap, global head of working capital and supply chain finance at Barclays, welcomes Cameron’s announcement and expects the bank to be heavily involved.
He tells GTR: “We’re really excited that the prime minister is behind this and certainly with the response we’ve seen in the public and the press. We’ve had this product for a couple of years and now to see it take off and other people see the benefit of it is a great situation.”
Mike Holley, CEO of specialist trade credit insurer Equinox Global, sees potential for it to be rolled out further. He tells GTR: “At the moment, the initiative only applies to the top-tier companies that have the highest rating. We see further potential for those companies that fall outside of that, but which have multiline credit insurers behind them.”
The SCF initiative comes on the heels of an International Trade Monitor report that shows confidence among UK SME exporters and importers to be at its lowest point since December 2011. 30% of the companies polled named credit availability as their number one concern. With traditional lines of credit drying up, 20% are looking at alternative sources of raising capital.
While acknowledging that any move to increase affordable access to funding is welcome, Will Davies, co-founder of property maintenance SME Aspect, tells GTR that he’s sceptical about how useful the SCF initiative will be.
“From my understanding of it, large blue-chip companies have to confirm to the bank that the invoice before the loan is paid. It’s difficult enough getting any sort of response out of blue-chip companies and their credit control departments, let alone saying ‘will you take a little bit of extra time to confirm to our bank that you’re going to pay this invoice?’”