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In its simplest form XMFL is a means by which buyers in a supply chain can extend payment terms in a non confrontational way. It enables extended trade credit periods and reduces supply chain working capital requirements in a manner which is commercially acceptable. It benefits suppliers by turning extended credit term sales into 'cash sales' in return for a cash discount.
Liquidity to fund these early settlements is supplied by the financial services sector. XMFL securitises the underlying transaction with a combination of financial and administrative techniques including guarantees, warranties and sophisticated re-insurance derivatives. Combining proven techniques from other areas of finance to the particular arena of trade and transactional finance enables us to satisfy the lending criteria of selected credit institutions to fund the XMFL programme.
This approach differs from conventional factoring solutions which benefit only the supplier in a transaction. It also delivers supplier financing to the buyer. Even in situations where the buyer has access to adequate lines of credit it delivers crucial advantages:
- zero cost to the buyer because there is no cost of borrowing
- opportunity to extend payment terms with positive support from suppliers and with its public reputation intact
- no reduction or impact on any existing borrowing facilities
The buyer becomes an advocate for the programme whereas conventional discounting or factoring may be an irritant. The supplier retains choice over when or if they use the XMFL programme. There is no term contract or 'whole of book' commitment. When used it provides immediate settlement of the cash price without retentions, concentration limits, or recourse for bad debt or late payment.
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