Having established itself as a leading global provider of trade and working capital solutions, Santander is poised to play a key role in the burgeoning US market.
As demand for working capital management solutions and supply chain finance escalates across the United States, Santander is committed to meeting its corporate clients’ specific requirements for sophisticated structured solutions. In particular, the bank is eager to play a critical role in helping corporate clients manage their working capital cycles, which, as Mariano Urquiola, head of sales, global transaction banking at Santander US explains, is now one of the highest priorities for businesses in multiple sectors across the US market.
“There is a report from one of the leading auditing firms which states that working capital management is expected to be the primary concern for businesses over the next three years – ahead of their product offerings and even ahead of margins,” he says. “Both trade and supply chain finance have a huge role to play in working capital management.”
Urquiola points out that such is the significance of improving working capital management that it is now a top level boardroom priority for many corporates. “Whereas in the past, trade financiers have always dealt with corporate treasurers since the financial crisis, CFOs and even CEOs have started to get more involved in discussions on working capital management,” he says. “Banks are now going to the very top of companies to kick-start their discussions.”
The provision of working capital management solutions has been a vital component of Santander’s offering to corporate clients for decades. It became a pioneer in this space with its own global proprietary platform – Confirming® – in the 1990s. Since then the bank has continued to develop and structure different solutions for its corporate clients. As Urquiola notes: “Working capital management and supply chain finance are part of Santander’s DNA.”
Broad range of working capital solutions
Today, the bank offers a range of products in every segment of the working capital management and supply chain finance space from payables and receivables finance to inventory finance with the goal of alleviating stress on different sides of its corporate clients’ balance sheets. “Working capital management goes beyond receivables finance and supply chain finance to areas such as pre-export finance and inventory finance,” says Urquiola, pointing out that the solutions offered by the bank are matched to corporate clients’ needs. “In some cases, payables discounting may be the most appropriate solution but for other companies, structures around their inventory or their account receivables will work better.”
Santander’s product suite includes receivables discounting structures, which are offered on an ad hoc (individual) basis as well as on a portfolio basis, payables discounting, repo transactions, borrowing base facilities and export pre-payments. The bank also offers structures, which are designed to extend corporate clients’ payment terms – and even allow them to hold their inventory outside of their balance sheets for a certain period of time until they require it.
In order to ensure that corporate clients capitalise on the options open to them, the bank always carries out a thorough analysis of their business and working capital needs. “Our goal is to a conduct a working capital analysis of the corporate client, and this includes comparing its metrics with those of its peers so that we can recommend a specific solution that meets that corporate client’s exact requirements, and aligns it better alongside its peers,” says Urquiola. “If for example, the corporate client is holding higher levels of inventory than its peers, then we will recognise this and propose solutions for this side of its balance sheet.”
A supply chain finance boom
While the provision of working capital management solutions can take different forms and guises, supply chain finance has come into its own across the US market in recent years, and is gaining recognition by a much wider range of businesses in different sectors. “Demand for supply chain finance has grown enormously across the US market over the last few years. Initially it was sought as a form of risk management and as a way of reducing debt levels, but then it became a way to take advantage of excess liquidity in the markets while improving working capital metrics,” says Urquiola. “Today, supply chain finance is increasingly being seen as a way of strengthening relationships with suppliers.” He explains that many corporate buyers now recognise supply chain finance as a solution that ensures the stability and working capital flows of their suppliers, thereby ensuring that they, as buyers, receive their supplies as and when they need them. “Supply chain finance as a solution creates a situation where suppliers are paid earlier, thereby boosting their (the suppliers’) working capital. The buyer benefits from knowing it has secured the financial position of its suppliers and, from a financial perspective, is also put in a better position to negotiate discounts with those suppliers on orders it places,” says Urquiola. “For corporate buyers, suppliers are their lifeline. They need to ensure they receive the supplies they need in the right quantities and at the right time.”
A mature US market
He acknowledges that the US supply chain finance market is now much more mature than in many other countries across the globe. However, companies in sectors such as retail and consumer goods, which were pioneers in the roll-out of supply chain finance programmes, are looking for ever-larger facilities. There is also growing interest and demand from other industries such as technology and telecoms. “Companies are looking at each other’s metrics. If they see that another company in the same sector – or one of their own buyers or suppliers – roll out a supply chain finance programme, they link into the concept and start considering doing something similar themselves,” says Urquiola, noting that the example set in this space by beverage companies is now being followed by bottling companies. He adds that achievements of early movers in the supply chain finance space have also led to a much better general awareness and understanding of the solution, and the benefits that can be derived from its deployment. “In the past, banks had to explain supply chain finance to their corporate clients and how it could help them improve their working capital management,” he says. “Today, the conversation is much more about how to set up a programme, the speed of implementation and who to involve.”