Lloyds TSB: Supplier Finance Facility Launched
Lloyds TSB is the first bank in the UK to provide supplier finance supported by a tried and tested web-enabled system that is available right now.
Supplier finance is designed to enable major corporate buyers to benefit from extended supplier credit terms or early settlement discounts, while offering their suppliers immediate cash for approved invoices i.e. working capital support and at a competitive finance rate.
These 'buyers' must be investment grade businesses, but they do not need to have an agency rating, just a financial strength that will allow Lloyds TSB to view them as equivalent to a BBB - or better rated business.
SETTING SUPPLIER FINANCE STANDARDS
From the start we wanted to make sure that we would bring supplier finance to the UK market by exceeding the already high standards set for this product in the US, Asia and Spain.
To achieve this, Lloyds TSB has chosen its Commercial Finance business to deliver the supplier finance solution because it has the established skill set and staff resources (over 1,000 people work in Commercial Finance) that already deliver working capital financing to thousands of UK businesses.
Our people maintain a consistent high standard of customer service delivery - which is very important to clients as they are presenting this solution to their suppliers. Presentation and service are key components to successful supply chain financing solutions - well explained and supported programs are eagerly taken-up.
In addition, Lloyds TSB Commercial Finance had to ensure that we delivered supplier finance via a robust IT platform and an easy to navigate web based front-end. This is why we chose to partner with JP Morgan Chase, who provide the tried and tested systems infrastructure, plus the practical experience of delivering this solution in the US, Asia and Europe.
UNLOCKING THE CASH IN THE SUPPLY CHAIN
Buyers can realise a massive cash boost and / or supplier early settlement discount at no cost to themselves. Furthermore, we have obtained confirmation from leading accountants that the structure of the Lloyds TSB solution does not increase the buyer's debt on the balance sheet by reference to both FRS 5 and IAS 1 accounting standards.
Unlocking the cash in the supply chain enables buyers to reduce their working capital, pay-down debt, plug a pension fund deficit, finance growth and whichever way one looks at it, supplier credit supported by supplier finance makes the key financial ratios much stronger.
But supplier finance is a two-way-street, as it not only makes the buyer more competitive, but it also delivers key benefits to their suppliers. For them, supplier finance gives instant online access to cash payment for their invoices, as soon as the buyer has approved them for payment.
Suppliers can chose to turn invoices into cash at any time and select just the invoices they want funded, thereby matching exactly their working capital requirement day by day and always with the certainty of receiving funds from a bank when they need it, as opposed to 'hoping the customer will pay on time'.
100% TRANSPARENCY AND SIMPLICITY
For the first time, suppliers can access 100% of their invoice value - not the 85% that is usual with invoice finance products, and at a competitive finance charge which is shown on the web site as a single flat charge deducted from the value of the invoice.
Never has financing been this simple and the cost so visible – there are no fees, service charges, no management time is spent on setting-up this facility, and supplier finance is provided to them without the need for audits, reconciliation, facility limit reviews and covenants – none of this applies.
It gives suppliers immediate support for their working capital needs, supporting the growth of their business with the buyer, and as a little bit of icing on the cake, it's off balance sheet finance for them too.
In summary, supplier finance enables major corporate businesses to better manage their supply chain, making them more competitive and at the same time strengthening their supplier businesses – a win, win partnership.