Supply Chain Finance
CBA recognizes the need to encourage synergies along our customer’s value chain. It is for this reason that the Bank has developed tailor made funding solutions through our Supplier Finance Product. These solutions are designed to enable customers to benefit from improved working capital and liquidity managements along their value chain.
Our Supplier Finance solutions include:
- Invoice discounting
- Reverse Factoring
- Local Purchase Order or Contract Financing
- Distributor Financing
This is a form of short-term borrowing often used to improve a company's working capital and cash flow position. It allows a business to draw money against its invoices before the receipt of actual payment. The business borrows a percentage of the value of its sales invoices (discount factor) from the Bank, effectively using the receivables due as security for the borrowing. Credit risk (the risk of default) is on the supplier. We finance up to 80% of the invoice value and discount the invoices for a period not exceeding 180 days. Discounting commissions are charged on the amount borrowed.
At CBA we have a pre-approved list of private and public companies that we discount invoices for and any supplier to the selected companies can request for discounting of their accepted invoices.
Reverse factoring is a financing solution initiated by the buyer where the buyer chooses which invoices they wish to sell to the factor (financier). This solution helps suppliers to finance their receivables at a lower cost since pricing is based on the buyer’s credit profile. The credit risk (the risk of default) is hence on the buyer. Reverse factoring is usually 100% of the invoice value net of factoring and typically credit periods do not exceed 180 days.
This offers distributors of major corporate clients (anchors) an alternate financing solution. The structure is governed by the Distributor Finance Agreement in which the anchor recommends the distributor, and the limits they should enjoy.
The Bank establishes individual limits for the distributors which they can use to purchase stocks from the anchor. The solution can be tailor-made to suit each distributor’s funding requirements. The distributors use the credit lines to pay the anchor and enjoy credit terms which allow them ample time to sell the goods and pay-off the Bank.
This is a funding method that allows a customer to access funding on the basis of a confirmed purchase order. CBA offers up to 60% of the LPO to enable procurement of goods or services required to perform on the contract.
The facility is available to customers who normally trade with reputable companies and with good credit rating. Proceeds from this facility are released directly to the ultimate suppliers of goods or services being financed. The client is then expected to perform on the contract with proceeds from the contract being assigned to the Bank. Due to performance risk issues associated with contracts, the facility calls for some level of collateral