Compagnie Générale d’Affacturage, a wholly owned subsidiary of the French bank, said it was launching the platform in response to recognition among large corporates that they can foster growth by supporting the European SME sector.
Supply chain finance (SCF) is typically the preserve of large companies that can often have hundreds of individual suppliers, but signs are emerging this type of short-term financing is being considered and embraced by SMEs.
Indeed, Philippe Lepoutre, chief executive of Compagnie Générale d’Affacturage, told Euromoney in February the bank was seeing requests for SCF from smaller companies. However, he said the bank would only pitch this financing if companies hold an investment-grade credit rating or equivalent.
“Under Basel III, the risk-weighted-assets consumption is much higher when the rating is lower,” he said. “In order not to consume too much equity, we would reserve this type of programme for well-rated companies.”
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| Philippe Lepoutre, chief executive of Compagnie Générale d’Affacturage |
In a SCF programme, suppliers receive payment early from the bank while the buyer is able to extend its payment terms, allowing both parties to benefit from improvements to their working capital.
For suppliers, the new Compagnie Générale d’Affacturage platform offers three main components: optional pre-financing of their invoices; off-balance-sheet accounting treatment; and flexible and detailed electronic reporting.
For buyers, the platform offers: a payment factory option; reporting on the use of the programme by their suppliers; cost savings; and the ability to open up the platform to third-party financial partners, which might provide additional financing.
SCF is attracting a lot of attention from banks because of the level of growth rates this business is recording, with some large international banks reporting annual growth rates as high as 30% to 40%, according to a report last year from Demica, an advisory firm specializing in working capital solutions and technology services.
The report said that retail, manufacturing, consumer products and pharmaceuticals companies are among those most likely to set up SCF programmes.