A new solution, Sales Finance can provide a company’s distribution networks and end-customers with access to alternative sources of liquidity when traditional sources aren’t available or adequate. Now, multinational companies are often leveraging sales finance programs to gain market share, increase sales in regional and global markets, reduce counterparty risk, and strengthen relationships with key customers.
In emerging markets, where sales are often constrained by the limited credit available to buyers, Sales Finance can be an especially important tool for achieving sales targets. By offering end-customers and distribution channels a new source of liquidity via extended payment terms or direct bank lending, Sales Finance can help companies improve their competitive value and win both additional and new business.
Sales Finance can help deliver gains for corporates from all sectors. But it’s critical to start with clear strategic objectives—including sales volume growth targets and working capital ratios— to ensure that the program is structured to achieve its targeted goals.
In sales finance, there is significant variation—even among global banks—in terms of execution, experience and global capabilities. Choosing the right banking partner is critical.
A large, diverse agricultural corporation sells planting and harvesting solutions to farming suppliers in Argentina and Uruguay. Planning the right timing of the sales is critical, as it can make or break a season’s sales targets. The company wanted to offer its buyers efficient financing solutions to help facilitate additional sales, but short growing cycles that only last several months made it even more challenging to achieve.
To meet the client’s complex and unique needs for a strategic financing solution, Citi designed a distribution finance purchase facility with a first loss indemnity from the company based on its sales targets for the optimal phase of the growing season.
Citi and the company agreed to a pre-approved credit limit based on buyers’ track record with the company and program. Citi pays the company upon the presentation of checks and cashes them in upon check maturity, utilizing the check custody infrastructure present in both countries. The facility is key to the company’s sales strategy in both countries, as it supports the offer of sales in local currency. The solution also allows the company to optimize its exposure to the buyers, enabling sales growth so the agricultural business can fully reap the fruits of their labor.
