What is Supply Chain Finance?
Supply Chain Finance is a programme implemented by a Payer in order to offer their suppliers early payments against discounts for receivables they are due. Finverity would pay a supplier for goods or services on the day they have been delivered to and accepted by the payer and collect the funds from the payer at a later date.
Who does Finverity service?
Payers: Middle-sized companies who buy goods or services from a range of suppliers.
Sellers: The suppliers of the above-mentioned payer who wish to receive payments earlier than the payment terms currently applicable.
Funders: Institutions or HNWIs who wish to access a fixed income, liquid, recession-proof asset class with frequent pay-outs.
What is the eligibility criteria for businesses?
Suppliers must be trading with a payer for a minimum of 3 to 6 months before accessing Finverity services and the payer must be registered and onboarded on our platform. Please note Finverity is not a solution for payers with a poor repayment track record, but rather a solution for working capital optimisation in situations when payers with adequate financial health impose long payment terms.
Are there any min or max in terms of financing amount and payment terms?
Minimum transacted invoice size is $800 and a minimum payer turnover is $25M. Minimum payment terms acceptable on Finverity are 14 days and the maximum is 180 days.
How does Finverity’s supply chain finance facility affect my balance sheet and my accounting?
The process in our Supply Chain Finance programme is a truesale of an account receivable. Thus, a receivable that is documented in your accounting will have a total value of X. Through Finverity, you will be able to sell the receivable at a price of X – our fee. Thus, the impact on your balance sheet is that the receivable will not be turned into cash.
Will any of financial information be shared with other third parties?
Financial information of the sellers is not normally part of the due diligence process for Supply Chain Finance deals. However, that being said, Funders may ask to see information about suppliers in specific deals and this will be shared with them in that situation. By registering to the Finverity service and engaging with our platform, you confirm this is acceptable.
Are there any hidden fees or other costs on top of the cost of financing?
No. The selling price you see on your screen when selling a receivable is the exact amount you are due to receive in your bank account once the transfer has cleared.
I want to sell receivables from a payer who is not using Finverity. How can I refer them to you for onboarding?
Suppliers can only sell invoices of payers who are registered and onboarded on the Finverity platform. Once this has been done, our risk team will asses the payer and if they fit our profile, we will reach out to them for onboarding. We may ask you to be involved in the process if you wish!
Why would I implement the Finverity platform?
Finverity offers payers a range of solutions aimed at:
- Optimising working capital and cash flow positions.
- Reducing back-office costs and payment complexity.
- Improving relationships with suppliers and offering them early payments.
- Generating additional revenue via Dynamic Discounting.
Finverity is committed to offering a comprehensive suite of solutions customised to the needs of our payers on top of the traditional financing.
How easy is it to implement Finverity and what must we do?
As long as your data is in order and up to date, it doesn’t get any easier!
Please click here to see the full implementation flow.
We call ourselves a Fintech and unlike many others we actually are. Our process seeks to have minimum disruption to your daily operation and make things easier and cheaper! Thus, for those Buyers who have a sophisticated technology stack, we integrate into ERPs or Accounting systems to automatically pull all the data we need to service you. Sometimes all we need is your permission, other we work together with your team for a few days to get everything right! If the timing is not ideal to start that process, we can work with document exchange automation which is ready to go straight away. Flexibility is key.
How does Finverity’s supply chain finance facility affect my balance sheet and my accounting?
Finverity’s SCF facility is offered on the basis of existing contracts and agreement with the underlying suppliers. Therefore, when a receivable is purchased from the supplier, this causes no change in accounting or on the balance sheet. The only change would be the payment target account for the payable would be updated to Finverity’s account.
In a situation where working capital optimisation is desired, the underlying contracts with suppliers would be amended in the process so that the above statement remains true and there is no leverage created and no changes to accounting.
What kind of funders does Finverity work with?
Regulated Financial Institutions (Banks, NBFIs), Sophisticated Investors, Self-Certified Sophisticated Investors, Certified Professional Investors.
Will any of information, financial or stakeholder related, be shared with other third parties?
Information provided will be shared with potential funders in order to allow them to perform the necessary due diligence before financing a deal. Furthermore, your data will be used to suggest optimisation and improvement of operations through our solutions.
Finverity places great emphasis on the security of your data and all financial, transaction, personal and company-related information is stored with the highest level of security.
Who can fund deals on the Finverity platform?
Sophisticated Investors, Self-Certified Sophisticated Investors, Certified Professional Investors and Regulated Financial Institutions. Finverity is monitored by the FCA for KYC/AML, under number 832505, and thus any investor must pass all verification as part of the onboarding process to be permitted access to the platform.
Is there a minimum ticket size requirement?
The minimum ticket acceptable for investment at the moment is £250,000.
Are my returns guaranteed on Finverity?
Finverity acts as an origination pipeline, an infrastructure provider, a fraud prevention mechanism and an automation engine. The platform’s role is connecting investors with SCF opportunities and making the execution of such deals simple and scalable. Finverity does not guarantee returns directly. However, all Finverity deals come with a level of security from the payer attached.
How am I protected from a legal standpoint when investing through the platform and what happens if Finverity goes out of business?
Finverity’s infrastructure places great emphasis on the security of funds and ownership for the investor. Thus any funds that are funnelled through the platform will sit in an account in the name of the investor with a top tier custodian bank. For GBP for example, it is Barclays.
Furthermore, once receivables have been purchased, these are assigned to Finverity on trust for the Funder, who is the ultimate beneficiary owner of the deed for the receivable.
When repayment from the payer comes at maturity, the funds are transferred to a reconciliation account that automatically allocates your share of the receivable back to your named account.
Thus, the Funder is the owner and has full control and title over funds or assets throughout the whole investment process. Even in the very unlikely situation that Finverity goes out of business, the Funder has full right and all the tools to recover funds and receive payment in full including interest. From a legal standpoint, Finverity’s processes are underpinned by a solid legal framework drafted with top law firms and customised to the exact flows and procedures present on the platform. For every jurisdiction in which our payers reside, the documents are further backed by legal opinions from local council ensuring enforceability, true sale, tax and arbitration or dual treaty questions are well answered for our Funders.
Will my financial information be shared with other third parties?
Investor’s financial information will not to be shared with any other parties excluding regulators if required without prior written consent.
What due diligence is done before onboarding a deal?
Each deal on Finverity’s platform undergoes a rigorous process of credit and legal analysis, fraud prevention clearance and debtor’s systems integration before being available for investment, to guarantee the highest quality deal flow.
Finverity’s due diligence process is a filtering mechanism. We want our name to be synonymous with high-quality deals flow, returns delivered as promised and no unpleasant surprises. Thus we undergo thorough verifications before bringing anything before our funders. That being said, you should never rely solely on our research and should seek to perform your own due diligence and fully understand the risks before making any decisions.
Supply chain finance is essentially a senior unsecured credit risk on the payer hence we analyse the payer risk based on multiple parameters including Business Risk, Size, Profitability, Leverage, Coverage, and the most important Free cash flow generation ability and Liquidity. We analyse the short-term cash needs of the business through an analysis of 1) receivables portfolio to arrive at Dilution, Delinquency and Default profile and Customer concentrations 2) any near term debt maturities and 3) Committed bank lines available. Although we finance payables of the payer, the risk of non-payment arises only if the short-term liquidity profile of the company is weak.
What we avoid is a combination of high Leverage, full credit lines, deteriorating collection profile and high customer concentration.
The data from companies are validated from Third-party systems and market feedback, preferably from existing lenders. KYC/ DD on the group structure and People behind the business is done to check any signs of high risk.
Some of the above-mentioned parameters form the basis of our Credit Rating which maps to the Moody’s corporate credit ratings for our investors to have an indication of the risk. The rating also feeds into our pricing model.
- Fraudulent Invoicing: All the invoices on the platform are confirmed by the payer mitigating the risk of completely fraud invoices.
- Double financing of the same invoice: most jurisdiction we work in have a need to inform the debtor for the perfection of true sale as we finance only confirmed invoices our charge is perfected and the other Financier risks losing money!
- Risk of collusion: We take transaction history between payer and Supplier and match it with bank account statements to confirm the trading history. Our system is capable of flagging any anomalies which may require additional attention.
- Data Manipulation by payer: We intend to work with companies which have solid operational controls and can plug into our system to transfer invoice data directly from the accounting system. We also have a provision to conduct an Audit on the invoice data by a third party.
Our model is based on True Sale of invoice and is underpinned with Legal Opinions on all jurisdiction to cover clawback and re-characterisations etc.
Cross defaults, IPU and cash reserves provide additional protections against payer default.
What happens if the invoice is not paid by the obligor?
If an obligor does not pay an invoice on the maturity date, this invoice is considered delayed. At that moment, additional interest starts accruing for the moment of repayment. Finverity will initiate discussions with the payer and asses the likelihood of timely repayment. In most cases, we expect to be notified of a payment delay before the maturity date.
If an Invoice continues to be delayed past the duration of the term after maturity, this Invoice is considered defaulted. In that situation, we will initiate efforts to recover the funds through legal matters.
Please note, all deals on the Finverity platform will have a Dynamic Cash Reserve.
Dynamic Cash Reserve is an amount available to Funders to settle non-payment of Invoices by the Payer. The amount is deposited by the Payer in a segregated bank account with Finverity before the invoice are purchased from the Sellers. The amount would be agreed by Finverity with Payer prior to disbursal and may be increased or decreased by Finverity on a monthly basis or in the period as agreed between the parties.
- In case of non-payment of an invoice on the maturity date, Dynamic Cash Reserve would be used to repay investors on the maturity, post which ‘2’ will follow.
- During the normal course, If the Dynamic Cash Reserve is not replenished by Payer to the required levels, Finverity will not purchase any new receivables and the facility will terminate if the shortfall has not been cured for a continuous period of 7 days.
- On termination, Finverity will stop buying any new receivable and will collect on the due date any outstanding receivables. Any shortfall in payment on the maturity date will be debited from the Dynamic Cash Reserve and the remaining amount in the Dynamic Cash Reserve, if any, would be returned to the payer.