UniCredit found the right recipe to break a long-lasting constraint in the discipline of supply chain finance: this innovative, technology-intensive financing product can now also be used effectively in the SME corporate segment.
The recent deal between UniCredit and a German food wholesaler provides very concrete evidence of how a successful supply chain finance programme can be centred around a small buyer, with a total turnover below 50m euros and a proportionally smaller purchasing volume.
The basic idea of supply chain finance is that a bank facilitates the business interaction between a buyer and his suppliers via a web-based platform, which is used to share the information on which invoices have already been validated and approved for payment. Based on this data, the suppliers can send an online request to the bank to finance the approved invoices, thus immediately receiving a discounted payment. The bank then debits the buyer automatically with the full invoice amount at maturity, according to the instructions present on the platform. Thanks to this mechanism, the suppliers can finance themselves at the rates that would normally be applied to the buyer, since the confirmed invoices allow the bank to fully allocate the risk against the buying organisation.