Over the past few weeks, I have discussed working capital finance with people across a wide array of forums-- from Silicon Valley Innovation Center’s Banking Disrupted to Global Trade Review’s Mexico Conference, Money20/20’s annual pilgrimage, and conference rooms all over the U.S. and Mexico. As I reflect back on those miles, there were some recurring themes that rang clear.
When we think about working capital finance, there are issues that will arise in every jurisdiction-- compliance, regulation, the REAL cost of capital. These issues all obfuscate the real goal of any business owner (small, medium-sized, or large): When am I going to get paid? Alternatively, people think about, “When do I have to pay?” In combination, those two questions belie the desire for working capital certainty.
As we focus on the construct of working capital finance, whether it falls under the guise of dynamic discounting, supply chain finance, or trade finance, those two questions are at the root of the business owner’s working capital issues.
While there has been a fair amount of fintech discovery in working capital finance over the past year, the concepts are age-old financing mechanisms. As we and other financial technologists seek ways of making the process of working capital finance more efficient, we should keep one question in mind. Are we creating the means by which businesses can pay and get paid on their terms?
Chief Revenue Officer