Supply Chain Finance increasingly strategic

Increasingly strategic in accessing credit the role of Supply Chain Finance (especially considering that between inflation and the increase in interest rates, liquidity has been reduced in 2023 of Italian companiese) allowing working capital to be financed by leveraging the role and relationships of the supply chain. After reaching 560 billion euros in 2022 (with growth of +10.2% on the previous year), the potential market for supply chain credit in Italy continues its expansion in 2023, with growth estimated between 0.5% and 3% to reach a value of 563-575 billion euros in total trade credits. These are the results ofSupply Chain Finance Observatory of the School of Management of the Polytechnic of Milan, presented during the conference “Supply Chain Finance: a new increase in the interest “rate”?”.

Businesses and liquidity: Supply Chain Finance “ally”.

About a quarter of potential market it is already served by Supply Chain Finance solutions (23%), which in 2023 will reach a value of approximately 130 billion euros. Among the various solutions, the most used in 2023 are Factoring (the transfer of commercial credits to specialized operators) for a total value of 60.4 billion euros, stable compared to the previous year, and the Invoice Advance, also it stable at 54 billion euros. Reverse Factoring follows at a distance (the partnership to encourage the transfer of invoices to suppliers by exploiting the customer’s creditworthiness), which recorded a record growth of +10%, reaching 8.9 billion euros in value.

Then come Confirming (the solution in which the transferring debtor issues an authorization to pay suppliers to the financial operator), 1.6 billion euros down by 2%, and Purchase Order Finance (the use of an order received from a customer with high creditworthiness as collateral for a loan), increasing by 1% to 1.1 billion euros. Although they still have limited volumes, B2B Credit Cards are growing significantly (+13%, 3.5 billion euros), Dynamic Discounting (a technological solution that allows advance payment with a discount proportional to the days in advance, +32%, 0.7 billion euros) and Invoice Trading (marketplace for the transfer of credit that allows third parties to invest in invoices issued by companies, +24%, 0.5 billion euros), demonstrating a greater knowledge and adoption of these tools as well.

PoliMi: potential market between 563 and 575 billion

“During 2023, the macroeconomic slowdown tgeopolitical tensions and inflation have introduced new challenges for global supply chains, while the relentless rise in interest rates has further raised financing costs for businesses – says Federico Caniato, Director of the Supply Chain Finance Observatory -. In this complex scenario, Supply Chain Finance is a key element in offering easier access to credit for businesses in difficulty. An ally capable of satisfying the need for liquidity and financing working capital, taking advantage of supply chain relationships that could reduce the cost of capital.”

“Great potential”

“Supply Chain Finance it still has great diffusion potential, particularly among small businesses – explains Antonella Moretto, Director of the Supply Chain Finance Observatory -. From our survey, Italian SMEs express the need for new financing solutions, but they still know little about the opportunities of the SCF. Businesses must be supported in education towards the most innovative forms of financing, which at the same time must guarantee rapid and streamlined approval processes, together with human support that can guide and support the SMEs in financial choices”.