Supply chain financing in transition

By Bob Trebilcock ·

February 21, 2020

Last month, I spoke to Raistone Capital about a program it had initiated to speed up the payment of tariff refunds, for a fee, to companies that qualified for a rebate. During the conversation, Dave Skirzenski, Raistone’s CEO, explained that his firm jumped into the supply chain finance business, including supplier financing, when big banks began to exit the space because of banking regulations. Nature abhors a vacuum.

Since that conversation, I’ve noticed the number of emails coming into my inbox from other firms in this space. Just this morning, I was wrapping up a note to a writer who is working on a piece on this topic when I received an email from Harbor Trade Credit, another player in the space. It seems like there’s suddenly a lot of activity, energy and well, capital. Mark Trowbridge, a principal at supply management consultancy Strategic Procurement Solutions, LLC., and a frequent contributor to SCMR, said there’s a simple explanation for this. Purchasing professionals who have already wrung all of the savings out of their supply chains through negotiation, standardization and other best practices are turning to payment terms and financing as the next tool to drive value. It’s a space I’m interested in learning more about.

We tend to think of these programs as focused on the big players in the supply chain, the major manufacturers or CPG companies. But a conversation I had recently with Laura Goldberg, the chief revenue officer for Kabbage, explained that the small-to-mid-size market has needs similar to their bigger players, and maybe more so since historically, they have not had access to capital from traditional banks and often end up maxing out credit cards or borrowing from family and friends to keep their cash flowing. “We fish in a small pond,” Goldberg said. “Our targets are small businesses, and 80% of our customers have less than $10 million in revenue.” While Kabbage doesn’t limit itself to companies in our industry, that revenue number could fit the bill for a lot of the small niche suppliers of products and services in the supply chain world.

Like Raistone, Kabbage is funded by institutional investors. The firm bundles the loans it makes to customers into asset-backed securities. And it offers a variety of products, starting with lines of credit and including areas such as inventory financing and invoicing/payment products. They’re all focused on cash flow management. “There’s a lot of inventory financing, a lot of loans for equipment that are not collateralized and there’s financing for the unexpected, like a truck breaking down,” says Goldberg. “We think of ourselves a cash flow management company for small businesses. The best way to do that is to help with the money coming in, through invoicing and payment products, and the money going out in the form of loans.”

As I noted above, it seems as if there’s a lot of energy in this space right now, one, that with Mark Trowbridge, I’ll continue to watch.

February 20, 2020

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