Implementing a Collateral-Free Supply Chain Financing Solution for the Suppliers of a Global Steel Manufacturing Giant.
The client is a world leader in the production of steel plants and steel EPC contracts. As a frontrunner in the metals industry, the client has secured a spot among the top three manufacturers of plants and machines.
With a passion for innovation, the client leverages their technologies to undertake and deliver turnkey plant projects as well as manufacture and install machines and plants globally.
After years of growth, innovation, and commitment to delivering the best results—their current range of products includes steel plants, machines, and processes for all the production cycles of steel and non-ferrous metals. As a full-cycle provider, the client is setting high standards in metal business development.
The challenge: Overcome the delays of lengthy credit cycles with a bank-funded early payment facility
Facing complex and multi-tiered supply chains, the client was grappling with challenges in maintaining smooth cash flow across its growing network of subcontractors and service providers. Many of these suppliers relied on Letters of Credit (LC) for payment security.
The client needed a supply chain financing solution to ease the financial pressures on its suppliers, who were currently coping with prolonged and complex processes that hindered timely payments.
This often resulted in:
- Cash flow gaps disrupting project schedules
- Limited operational efficiency
- Strained supplier relations
- Extended payment cycles for subcontractors sts.
The objective: Roll out a collateral-free supply chain financing solution
With all this in the backdrop, there was an evident need for a digital supply chain financing solution that addressed the needs of LC-backed suppliers. The client wished to deploy a program that would release early payments to their suppliers without exposing their treasury and increasing their credit.
There was a need for a ‘fixed rate’ early payment program for suppliers designed to auto-accelerate all invoices for immediate payment once approved by the client, offered in partnership with a leading bank.
The key objectives included:
- Lowering the current 90-120 day credit period of suppliers with an early payment solution
- Offer early payments in exchange for discounts, thereby generating additional income for the client
- Focusing on reducing the Cost of Goods Sold (COGS) to increase supply chain efficiency
The solution: Bridging cash flow gaps with CredAble’s early payment platform
After multiple rounds of discussions, CredAble’s Early Payment Platform was identified as the ideal solution to achieve financing and supply chain efficiencies. The program successfully addresses the challenge of long credit periods for suppliers.
Here’s a look at the CredAble approach:
- CredAble partnered with a leading bank to enable funding for the Early Payment Program.
- The bank was quickly and seamlessly onboarded and integrated into the program.
- Through this program, collateral-free financing was provided to all suppliers. This further encouraged LC-backed suppliers to opt for open credit terms.
The CredAble impact: Measurable improvements across the client's payment cycles
By facilitating early payments for suppliers and subcontractors, CredAble's Early Payment Program helped the client with enhanced financial flexibility, digitising and streamlining their supply chain.
The CredAble impact:
- Payment accelerated by 42 days for the client’s suppliers
- 82% growth in invoices processed on the platform within the first four quarters
- Fixed-rate discounting lowered LC issuance costs and freed up LC limits
- Achieved ~2.3% annual savings on COGS as of the current period
CredAble's tech-enabled working capital financing suite is driving business reinvention for world leaders across industries.
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