Companies aim to give their suppliers a boost at the same time they extend payment terms.
More and more companies are signing on for supply chain finance. The financial crisis is credited with encouraging companies to find ways to balance their need to take longer to pay their bills with their suppliers’ need for cash, but the interest continues to grow even as the economy slowly picks up steam.
“One of the things we’re really seen take off over the last couple of years is supply chain finance,” said Michael Fossaceca, managing director and North America region head corporates for Citi Treasury and Trade Solutions.
But this is supply chain finance with a twist. “Years ago, supply chain finance was about extending [days payable outstanding],” Fossaceca said. Now, “many of the clients are using it more around the health of the supply chain. It’s become a really critical tool.”
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