Supply Chain Finance
Helping Buyers and Suppliers Optimize Their Working Capital
North Castle and its Supply Chain Finance (SCF) partner use third party capital and a proprietary cloud-based technology platform to quickly and efficiently pay Suppliers immediately on their approved invoices and extend the Buyer’s Days Payable Outstanding (DPO). The result is a “win-win” outcome for both parties.
Supply Chain Finance
The Current Situation OR Marketplace
Companies and their Suppliers struggle with cost-effectively manage working capital
Buyers typically pay their Suppliers in 45, 60, or 90 days, and want to extend their Days Payable Outstanding (“DPO”) even further so they can retain cash for as long as possible
Buyers can be middle market companies that have a strong credit profile
Suppliers desire earlier payment on their outstanding invoices to increase their liquidity and reduce their Days Sales Outstanding (“DSO”)
North Castle’s Solution
We partner with a FinTech-driven Supply Chain Finance (SCF) company that has an automated, proprietary and secure cloud-based platform that manages, automates, tracks, services, and reports the required approval and payment data on all Supplier invoices.
Implementation of an SCF arrangement improves the Buyer/Supplier relationship by reducing the inherent tension between Buyer and Supplier
Under such an arrangement, Supplier sends invoice to Buyer and Buyer “approves" the outstanding invoice
Supplier “clicks a mouse” to voluntarily accept the true sale of its approved invoices at a predetermined discounted price
Partner remits payment to the Supplier immediately (i.e., Day 1) at a slight discount
Buyer remits payment for the full invoice amount at an agreed-upon extended period (i.e. 60-180 days)
Benefits to Buyer and Supplier
Buyer extends its DPO, which significantly increases its cash flow and frees up capital for other uses
Buyer can automate accounts payable, reducing the time and cost of managing payables
Buyers do not incur any additional debt, as a SCF arrangement maintains trade payable accounting classification
The Buyer and Supplier relationship is improved as both parties benefit from a SCF arrangement
Suppliers receive immediate payment on their accounts receivable, albeit at a discount
Suppliers can reduce their DSO, thus improving cash flow liquidity and freeing up capital for other uses
A SCF program creates a “win-win” opportunity for both Buyer and Supplier!
Supply Chain Finance (SCF) Execution: Increased Buyer DPO, Reduced Supplier DSO, Thus Improving Cash Flow For Both Counterparties
A private equity-owned auto part manufacturing company wanted to implement a Supply Chain Finance (SCF)program. In this SCF program, the manufacturing company received an extension to their Days Payable Outstanding (DPO), freeing up working capital that was reinvested back into their business for various growth initiatives.