News Article

Bank Lending

Is enhanced discounting the solution to decreased lending from the banks?

By CreditMan Monday, October 27, 2014

Jon Keating, European MD of Taulia, believes the innovation lies in a new, ground-breaking supply chain finance solution.

Research conducted by Credit Management Research Centre at Leeds Business School on behalf of Taulia earlier this year found that there is a £75bn gap between trade credit (the credit a company extends to its suppliers so they can buy now and pay later) and trade debt (the outstanding payments). The research found that buyers who purchase goods with the intention to ‘pay later’ are not paying up for up to 120 days in some cases, causing a huge cash flow headache for small businesses.

Whilst dynamic discounting – paying a supplier early in exchange for a small discount - plays a part, the next step in helping small businesses to combat the problems which arise from late payments, is enhanced discounting. This new form of alternative finance enables businesses to secure funding from a third party financial institution to fund early payments, enabling them to receive discounts on their invoices and protect their working capital position.

Deployed through a SaaS application which connects a buyer to all its suppliers, it enables businesses to approve invoices fast and gives the buyer the opportunity to offer early payment to the supplier (even if cash is light). The enhanced discounting function is a prime example of how alternative financing is vastly improving the way buyers and suppliers interact with one another, creating a healthy alternative to bank funding.