“Cautious welcome” for supply chain finance scheme

Corporate giants including ASDA, Siemens and Tesco have joined a scheme to help finance smaller companies.

The government says its new scheme, Supply Chain Finance (SCF), is a new way for large companies to help their supply chains access credit and improve cash-flow at a much lower cost.

Through the scheme, a bank is notified by a large company that an invoice has been approved for payment. The bank is then able to offer a 100 per cent immediate advance to the supplier at lower interest rates, knowing the invoice will ultimately be paid by the large company.

It’s hoped that up to £20bn of cheaper credit will be made available from the large companies.

Quietly optimistic

Downing Street cites the Federation of Small Businesses (FSB) as being quietly optimistic about the scheme. “The FSB welcomes the Government’s commitment to helping small firms secure finance,” said National Chairman John Walker. “We encourage large companies to support and implement the scheme, so that it can play its part in improving confidence and encouraging growth throughout the supply chain.”

But the extent to which SCF will really get liquidity into the supply chain is yet to be seen. It has received only a “cautious welcome” from business groups.

Matthew Fell, the Director of Competitive Markets at the CBI said: “Boosting the use of supply chain finance is an innovative way to ease the funding squeeze for many smaller businesses, but it is dependent on the nature of individual supply chains to work effectively so is not a one size fits all solution.”