If you are in the lending business, you will find that the field has gotten very crowded over the last decade. With interest rates low and the stock market high, investors have been looking in vain for new places to put their money to get higher yields. Couple that with the new crop of FinTech’s offering loans over the internet and it’s no wonder why there is heated competition among lenders looking for borrowers to take their money.
There is an old saying that “everything old is new again” That is as true in finance as it is in fashion. Businesses are always looking for a competitive advantage so they are quick to move strategies when a market gets crowded. They have gone from the trend of just-in-time inventory, to extended payment terms from vendors, to finance that inventory, to shipping straight from the manufacturer. They will use anything to cut capital outlay and improve cash flow. Fifty years ago sellers looked more at margin than cash flow and would ask for discounts to cover the cost of holding inventory. Fifty years ago it was common to see terms of sale at 2/10 net 30.
While no one was looking, the largest corporations in the world have being changing the way they pay their accounts payables. Since the explosion of the business credit card, major players MasterCard, Visa and American Express have been salivating over the opportunity to issue branded credit cards to major corporations. American Express developed Open, while Visa and MasterCard worked with banks to offer procurement cards to the fortune 500 companies. These major players had a pretty clear road to domination; that is until some very clever young men in Silicon Valley created the virtual world of FinTech.
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PACA the Perishable Agricultural Commodities Act was established in 1930. The act was established to protect growers when they sold their goods off the farms. Before PACA there was much abuse and unfair trading practices when dealing with farmers. PACA was established to end these abuses and assure that farmers and their brokers get paid promptly. Farmers, brokers and distributers can all register with PACA and get all the protections it affords. The requirements are simple:
We all know of the names Ford, Chevy, Chrysler, Buick and Dodge when it
comes to the automotive world, but have you ever heard of Fisher?
Supply chain financing with AeroPay Express
The following article from the Harvard Business Review addresses the emergence of FinTech in supply chain financing used primarily by fortune 500 companies. For middle market supply chain finance and/or payables automation, contact AeroPay Express - the leader in mid-market supply chain finance solutions.
50 years ago it was common for vendors to give a discount for quick pay. Anyone remember the terms 2%/10 net 30? These were common terms given to buyers as late as the 1970’s. The seller’s terms were simply if the buyer pays their bill in 10 days they could take a 2% discount, if you waited the full 30 days to pay you paid net, which is another way of saying you paid the full invoice amount due.