Online Financing Boost for Small PlayersThu, 09/01/2016 - 16:02
Q: What advantages can eFactor Network offer to companies looking for financing alternatives?
A: Our online platform for supply chain financing offers a complete solution for companies and suppliers by reducing risks involved in the payment process and optimizing cash flows throughout the supply chain. To ensure payment for supplied goods, financing institutions have access to all due accounts. Through eFactor Network companies can finance suppliers in Mexico and other regions, using funds from national and overseas banks. This is the only platform in Latin America that is integrated as a multibank solution. Our product helps companies free up their lines of credit to use them for activities besides financing receivables. It simplifies the payment process, which is particularly difficult for corporations with numerous suppliers, and eliminates the need for financing players to perform an analysis on every supplier in the client’s network.
Electronic financing solutions were implemented with the Confirme program established by Spanish bank Santander. In 2001 they started to develop the program globally. We gradually identified business opportunities we could tackle, creating international factoring, along with export and import solutions in collaboration with several banks. We started supporting local companies that wanted to acquire business with foreign players, eventually building a global network.
Q: How does eFactor Network’s business model differ from other factoring solutions?
A: After buyers publish their invoices on eFactor Network’s platform, suppliers select the invoices they want to anticipate so our financing partners can delegate those resources. Once the account is actually due, the buyer directly pays the financing entity that took care of that invoice. This program has enjoyed an excellent reception internationally, especially considering the long time frames that rule most industries. According to Banco de México, the time frame for payment in most sectors is 90 days on average. This is even longer in automotive because it is primarily a manufacturing industry. That being said, only 1.7 percent of the national GDP relates to supply chain financing. There are still huge opportunities to increase our market penetration in Mexico.
Almost 35 percent of our portfolio is made up of 12 automotive industry suppliers operating in 12 countries including Ireland, England, the US, Canada and Hong Kong. Nemak, Volvo and Navistar are among our biggest clients. Our platform comprises approximately 10,000 suppliers from various sectors, mostly from the automotive industry.
Q: What strategies has eFactor Network implemented to target SMEs in Mexico, considering the lack of financial education in the country?
A: When we approach a new OEM or Tier 1 supplier we ask them for a list of their suppliers to contact them directly and explain the advantages of our solutions. Our offices in Monterrey, the Bajio region, and Mexico City allow us to target all three major automotive regions in the country. We operate in 14 countries and all 32 federal entities in Mexico through more than 30 financing brokers that connect us to global banking institutions. We also have a strategic alliance with Bancomext targeting supply chain financing for exports. Both eFactor and Bancomext approach suppliers with the goal of connecting them with different financing institutions.
Q: How will eFactor Network expand its presence in the Mexican market?
A: There are no supply chain financing solutions for Tier 1 suppliers. Therefore, our goal is to build specific solutions for these companies over the next five years. We created a specific program for Volvo Buses alongside Bancomext. We also want to create new products to address the needs of our clients, including client factoring and portfolio protection. Unlike supply chain factoring, client factoring has low overdue rates and high operations volume. Companies usually want to anticipate these payments at a corporate rate, which we can only do through client factoring. In terms of portfolio protection, we can support Tier 1 and Tier 2 companies that face bad debt risk as they start building relationships with smaller players.