Give them credit: Online auction site speeds receivables financing to auto suppliers
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 3/23/2009 1:07:00 PM
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The Receivables Exchange says it will focus its efforts in the coming months on helping the nation's more than 4,000 automotive suppliers gain the liquidity they need for continuing operations. By selling their receivables on the Exchange's open and competitive auction trading platform, auto suppliers will be able to realize funding in as little as 24 hours—a significant reduction from the current 45-60 day payment cycle.
Founded in 2007, The Receivables Exchange marketplace enables the entire supply chain to participate, allowing Tier 1, 2 and 3 auto suppliers to increase their liquidity by selling their receivables to major institutional capital providers. This is in response to the recent announcement of the Obama Administration's Supplier Support Program, in which currently only Tier 1 suppliers are able to take part in the government funded program.
Through The Receivables Exchange's proprietary trading platform, auto suppliers can quickly and easily sell their accounts receivable by posting their outstanding invoices to be bid on in real-time by a global network of accredited institutional investors.
"We hear from capital providers every day who are eager to invest in auto suppliers' receivables," says Justin Brownhill, CEO, The Receivables Exchange. "We applaud the government's Supplier Support Program as a great first step; unfortunately, it leaves out thousands of suppliers that desperately need access to cash today in order to be here tomorrow. At The Receivables Exchange, capital providers stand ready to help these cash-starved suppliers become better positioned to survive what is likely the worst financial crisis in history."
According to Brownhill, members of an auto industry trade association that represents suppliers reviewed The Receivables Exchange marketplace, indicating they say it as a viable alternative source of capital for suppliers.
Benefits cited include:
1. Increased liquidity. Access to cash in as little as 24 hours from the current 50+ day payables process
2. Complete financing control. Sellers (auto suppliers) set all auction parameters, including minimum advance, maximum fee and auction duration. If a bid does not meet the Seller's parameters, the Seller is not required to sell
3. Competitive cost of capital. Competitive real-time bidding by multiple Buyers drives down the cost of capital
4. Improved debt position. Receivables are sold as an asset versus traditional lines of credit, which are balance-sheet liabilities.
5. Less restrictions. Traditional lending institutions have restrictive covenants and liens on collateral, which can limit a business's spend flexibility
