Baku, Azerbaijan, July 13
By Ilkin Shafiyev – Trend:
A new complex of financial services linking all participants of the supply chain (buyers, suppliers and a bank) provided by PASHA Bank in Azerbaijan will help significantly facilitate access of small and medium-sized enterprises (SMEs) to financial resources, Aleksandr Golovko, director of the bank’s SME Department, told Trend.
He said that the supply chain finance is part of the new strategy of the bank, designed for 2018-2020.
“In this financing scheme, a kind of triangle emerges – a supplier, a buyer and a bank, which provides participants of this chain with the opportunity to manage the liquidity of business and get the maximum benefit from using supply chain finance,” he noted. “This set of solutions allows SME clients to get access to financing in a short time, without providing collateral and at rather low interest rates.”
He noted that the interest rates determined as part of supply chain finance are lower by an average of 2-3 percentage points than those on a standard credit line. In general, this range of services is more attractive for representatives of SMEs than a conventional credit line, Golovko added.
“Basically, the supply chain finance is of interest to businessmen involved in the supply of goods or rendering services in the B2B area,” he said. “Here it is possible to note oil and gas sphere, ICT, fast-moving consumer goods (FMCG), construction business, service sector and also trade sector, namely large supermarket chains. Supply chain finance is not suitable for entrepreneurs who work in the retail sector (for example, restaurants, cafes, etc.). In this case, a standard credit line that can be offered by the bank will be the more profitable for financing working capital.”
At the same time, the allocation of financing under supply chain finance is less dependent on the classical assessment of the financial situation of the supplier’s business, his or her credit history in banks, and more dependent on the history, sales volume, quality of business relations with his or her customers, availability of orders for the supply of products or implementation of work and other factors of transactional analysis of business activity, he noted.
“For example, a client who has a major contract with a potential buyer appeals to us, but the contract amount is more than the amount of working capital available in the client’s business,” said Golovko. “In this case, the client can receive financing from PASHA Bank, the necessary liquidity for execution of this contract. If the client applies for a traditional credit line, he or she will receive a smaller amount, because the client’s current financial condition will be considered according to the classical scheme of business financial valuation, where the capitalization of business, the amount of working capital, the transparency of management accounting, etc. play an important role. In the case of supply chain finance, we don’t set one limit, which restricts the seller regarding all his or her customers. Given the volume of business between a seller and his or her customers, we are considering the possibility of expanding the limit.”
---
Follow the author on Twitter: @IlkinShafiyev