European BusinessTalks to Morgan Terigi, CEO and Co-founder, Incomlend

How can companies diversify and increase their access to working capital? 

We believe that businesses, specifically small-medium enterprises (SMEs), adopt a fundamental approach to future-proof their business and overcome their financial barriers by diversifying their access to funding and reducing their reliance on traditional banks. 

SMEs can liberate their working capital and recover their financial health through alternative financing solutions to develop a more resilient business operation.  The access to working capital gives them the fiscal agility to seize growth opportunities amid global economic challenges.

With a quick turnaround finance facility, SMEs can cover their operational expense and execute planning with greater confidence and certainty. For those in manufacturing, the improved cash flow will also allow them to plan their next production cycle and ramp up their output when the product demand increases.

How does the digitalisation of supply chain financing help to prevent fraud and mitigate risks for companies? 

Digitalisation is no longer a choice but a critical necessity in a fast-evolving business environment such as supply chain financing. Investments in new technologies should be viewed as a business enabler vital to sustaining the company’s growth while keeping operating costs low. 

The digitalisation of processes and documents is an area that businesses can explore to unlock efficient data sharing and capital management. Covid-19 and the corresponding restrictions showed the weaknesses of relying on paper documents to conduct trade. Digitalisation reduces the cost of handling and processing for businesses, thus effectively using employees’ time and resources. It can also safeguard the company against fraudsters, who continue to be creative with defrauding paper invoices.

For example, we partnered with Bolero, a leading trade digitisation expert, to integrate their unique ePresentation and electronic Bill of Lading (eBL) technology with our innovative supply chain finance model to help close the ever-widening trade finance gap. The removal of paper and the introduction of e-documents allows for secure end-to-end transactions and the prospect of a highly efficient way to trade. eBLs can also be used as security for pre-export financing options.

What types of alternative funding solutions are available for companies? 

We strongly encourage SMEs to look into non-recourse financing options, such as the off-balance-sheet invoice finance solution that Incomlend offers. These can help SMEs keep the debt-to-equity ratio low and preserve their borrowing capacity, allowing them to spread their funding sources further. 

With invoice financing, SMEs are effectively selling their invoice and obtaining finance without risks involved. SMEs, specifically exporters, can fund their export invoices by selling them at a discount rate in return for receiving early cash for their receivables. 

Besides liberating working capital, invoice factoring can also insulate SMEs from debtor credit risk. This is especially important for companies in Europe, where 94% of businesses reported longer Days Sales Outstanding (DSO) than pre-pandemic levels. Additionally, many companies in Europe also experienced more late payments due to the impact of the pandemic. 

How did Covid-19 impact and change the global supply chain? How can companies prepare for a post-pandemic economy?

The global supply chain is suffering from the long-term impacts of Covid-19 and recurring clampdowns to curb infections across the world. In Europe, 74% of SMEs were negatively affected by the crisis due to supply chain disruptions, employee absences, and production shutdowns. 

The pandemic is here to stay, and we will continue to see economic uncertainty and disruption in the foreseeable future. Although governments worldwide have rolled out policies and programmes, such as wage support, to help cushion the impact of the pandemic on SMEs, these measures will start to dwindle over time. 

SMEs need to find ways to build operational and financial resiliency to manage future disruptions. We recommend SMEs adopt these three strategies to prepare for the post-pandemic world: 

• Establish a transparent view of their supply chain
• Invest in technology that accelerates supply chain efficiencies
• Diversify their funding by exploring alternative financing options.