Leading firms support supply chain finance
LEADING British firms including Tesco, BAE Systems and BT yesterday gave their backing to the government’s “supply chain finance” scheme, which aims to boost working capital for small businesses.
David Cameron hosted business leaders at a Downing Street roundtable, where 38 leading firms agreed to actively consider implementing the scheme.
Rolls-Royce and Vodafone, who already take part, affirmed their commitment to the programme, while the likes of Centrica, GSK and Diageo agreed to take part in the future.
Supply chain finance aims to ensure that small firms can compete with and win contracts from larger companies. These small businesses often have substantially worse credit ratings than the large corporates they supply, making it harder for them to access working capital.
Under the scheme a bank is notified by a large company that an invoice has been approved for payment and the bank is then able to offer an immediate advance to the supplier at lower interest rates, safe in the knowledge that the invoice will ultimately be paid by the large company.
Tim Fallowfield, company secretary at supermarket Sainsbury’s, said his firm have operated a similar scheme since 2007: “Suppliers benefit from improved liquidity and working capital and a finance rate linked to our cost of borrowing, ensuring smaller suppliers benefit from our credit rating as a large business.
“We believe this kind of arrangement has a really important role to play in strengthening supplier relationships,” he added.
However the CBI’s Matthew Fell was more cautious: “Boosting the use of supply chain finance is an innovative way to ease the funding squeeze for many smaller businesses, but it is dependent on the nature of individual supply chains to work effectively so is not a one size fits all solution.”