(BUSINESS WIRE)--PrimeRevenue described a program today outlining how a US government-backed initiative could provide 18 to 24 months or more in operational cashflow for the Big Three and their US-based direct suppliers. The value of the supply chain finance program, which could be deployed within a few weeks, is highlighted by recent published reports of automotive suppliers seeking cash advance payment on receivables in light of the current financial turmoil in the industry.
The program’s operation is based upon an underlying federal guarantee of Big Three payables to their direct suppliers. Unlike a loan, this guarantee would act as a ‘backstop’ to the Big Three’s payables, effectively honoring payment of those obligations in the event of a default. Private sector financial institutions would rely on the government guarantee to fund the early payment of receivables at rates highly favorable to the suppliers, providing a working capital improvement opportunity for both sides of the supply chain relationship.
“The US automotive industry has been deeply affected by the current turmoil in the credit markets,” said Joe Juliano, CEO of PrimeRevenue, “While not a panacea, Supply Chain Finance can be implemented quickly to support the liquidity needs of US auto companies and their suppliers, while at the same time unlocking significant bank funding, to help buy the time necessary to make these businesses successful again.”
James D. Robinson III, former Chairman and CEO of American Express Company, and General Partner, RRE Ventures is a board member of PrimeRevenue. In supporting the program, Mr. Robinson stated, “Supply Chain Finance provides a meaningful complement to solutions on the table today. Together with other government and industry initiatives, this approach directly can help the auto suppliers and the Big Three generate immediate working capital.”
A Supply Chain Finance (SCF) platform is a secure website that links payment information between companies, their suppliers, and financial institutions. Companies publish their payables information to the platform, well in advance of the payment maturity date. Suppliers access the website to view their receivables. If they wish, suppliers may select receivables to be paid in advance of the maturity date. Early payment requests are paid by third-party banks, directly to the supplier’s bank account, less a financing fee. In the case of a government-backed SCF program, financing rates would be extremely attractive as Big Three payables would be guaranteed by the US Treasury.
PrimeRevenue has forwarded information regarding its Supply Chain Finance approach to Congress, the Treasury and others.
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