Supply Chain Finance 101

Trade finance, reverse factoring, supply chain finance — there have been many names for it, but LSQ specializes in these variations of accounts payable financing.

You may have a lot of choices when it comes to optimizing your cash flow and ensuring maximum liquidity for your company. How do you choose the right solution for your business and for your suppliers?

From the middle market to Fortune 100 companies, LSQ’s unified working capital platform is intuitive and designed to make transactions painless for everyone. Suppliers are happy because they’re getting paid faster, you’re happy because you can maintain all of the advantages of positive supplier relationships without sacrificing any of your cash flow — and we’re happy because we get to help businesses thrive.

Supply Chain Finance Overview

Supply chain finance acts as a conduit for financing your suppliers. It works by utilizing third-party funders like LSQ to offer early payments to your suppliers, which lets you maintain positive supplier relationships while balancing your own liquidity needs. It also opens the door to further working capital optimization by extending your payment terms to your supplier base while helping to offset any negative impacts.

If your suppliers want to get paid early, supply chain finance can ensure they have the money on hand to help their business grow. If they can afford to wait out your net terms, no problem. Supply chain finance empowers suppliers to take control of their cash flow needs. All transactions, costs, and invoices are available at their fingertips in our easy-to-use online portal.

Supply chain finance is offered as a part of the LSQ FastTrack platform. We give buyers flexibility in funding their program through our own balance sheet, third party funding sources, or the buyer’s own capital (a solution known as dynamic discounting). Plenty of companies run advanced payment systems themselves, offering early payment in exchange for a deal on supplier pricing. As effective as these systems can be, it requires a lot of upfront engineering resources as well as day-to-day focus from your team. We can give you the best of both worlds: offer your suppliers the same opportunity to pay early, and return some of those funds to you.

How LSQ’s Supply Chain Finance Platform Works

The process is simple: you purchase goods and your suppliers invoice you, with agreed-upon payment terms. Once you’ve approved the invoice, upload it to LSQ FastTrack, and we’ll take care of the rest! If a supplier opts for early payment, you get to keep your cash on hand until you pay LSQ at the agreed payment terms. On the supplier’s side, they can see all approved invoices, as well as the date they can expect to be paid by you. If they want to be paid earlier, just a few clicks and they can have their money the next day, paid by LSQ — all at no cost to you.

Why Supply Chain Finance

The biggest reason our corporate partners choose supply chain finance is they want to offer flexible payment terms to their suppliers in order to insure supplier financial health, while maximizing the power of their own cash on hand.

It could be that you’re extending your payment terms, which can leave suppliers in a cash crunch, and you don’t want to leave them high and dry. Or perhaps your suppliers are willing to offer discounts for earlier payments, but your team just doesn’t have the bandwidth, technology, or capital available to process all of those requests and meet that offer at scale. Or maybe you want to ensure you’re supplying your vendors with as many tools as possible so that they can grow, and in turn generate more product for you — all without impacting your bottom line. Whatever your motivation, supply chain financing is a critical device in a company’s financial toolbox.

Why LSQ FastTrack

FastTrack stands out as one of the leading products in supply chain financing. Here are some of the top reasons leading companies choose LSQ over competitors:

We take care of all of your suppliers.
We’re here for all of your suppliers, not just a few. Many comparable solutions will only take on your top 5-10% of suppliers, leaving your smaller suppliers (who may need the financing options even more) high and dry. For many banks, it’s difficult to scale a supply chain finance program because truthfully, they don’t have the bandwidth to service every single one of them. LSQ leverages the power of a high-tech platform and combines it with the knowledge of our financial professionals so we can understand the needs of suppliers of all sizes — including your suppliers in the “long tail,” who could potentially benefit most.

Onboarding is a breeze.
The most significant measure of success for a supply chain finance program is adoption — how many of your suppliers choose to onboard and utilize the platform. Adoption rates for many players in the market are incredibly low. This is typically because other supply chain financing products are weighty, overcomplicated, and difficult to use. LSQ FastTrack strips away the complicated back-and-forth: your suppliers can be onboarded to our financing platform in four simple clicks.

Our dedicated outreach team will work directly with your suppliers to make sure they understand the platform. Plus, we’ll walk them through other financing options they’ll get access to, including accounts receivable and equipment financing.

You can get started sooner.
We’re flexible with integrations, so we can set up a program far faster than competitors, requiring no upfront engineering time from you — you can get started in a matter of weeks instead of months.

We’ll work with you to determine the best process for sharing invoice data based on your specific technology and team bandwidth. This can range from something as simple as sending spreadsheets via email, uploading invoices to the platform, or wielding full SFTP integrations and APIs.

We’re experts in supplier needs.
LSQ has over 25 years of experience analyzing invoices and payment practices of businesses. To put it plainly: we know what a healthy business looks like, and put that practical knowledge to use. We’re able to spot payment behaviors that may indicate financial instability and can understand the direction their credit is trending, sometimes even before one of the larger credit bureaus can. Our data science team has built an engine to make real-time credit decisions and to provide insights, and our analytics offer a deep-dive into accounts payable and receivable to better help suppliers understand their payment cycles.

Ready to Learn More?

Contact us today and one of our working capital experts will walk you through the LSQ difference. You’ll get to see how our product simplifies your balance sheet, strengthens your vendor relationships, and supports the growth of your suppliers.