HomeBlog – Insights by CredAbleBlogPre-invoice Milestone Based Financing for Suppliers

Pre-invoice Milestone Based Financing for Suppliers

Published on 11 Jun,2020

CredAble’s JIT financing platform functions as a pre-invoice financing platform for all vendors of the client. Pre-invoice stage financing for operators could bridge the gap in timing between payment obligations and client receivables. CredAble’s pre-invoice program provides collateral-free financing simply based on the occurrence of ‘billable’ events which can include process milestones such as issuance of POD, MIS, GRN, etc. This is enabled through CredAble’s proprietary risk and credit assessment algorithms that assess risk from an end-client perspective. In June 2019, RBI granted CredAble an NBFC license paving the way for proprietary lending within the pre-invoice ecosystem. The following entails a live case study with one of CredAble’s clients in the Employee Transportation business.

About the Borrower:

  • ABC Private Limited (name undisclosed for confidentiality reasons) is based out of Bangalore and was established in 2013 by two promoters
  • Provides services in the field of employee transportation, car rentals and airport transportation.
  • An employee transportation business requires transport facilities to be provided to employees of large corporates for pick up and drop services –Major clients include Amazon group companies and LinkedIn.
  • Owned fleet of 122 vehicles with extended network of 550 vehicles across 65 clients
  • 60 employees. The promoters have a combined 30+ years of experience as drivers before starting their own Employee Transportation business.Revenue of INR ~40Cr, 10% EBITDA margins
  • Average sales outstanding and average payables outstanding of 114 days and 86 days respectively

Working Capital Gap:

  • On a monthly basis, ABC bills Amazon companies for its services.
  • Invoice is raised in the first week of every month and Amazon takes ~30 days to release the payment to ABC creating a working capital gapfor ABC as it makes upfront payments to its drivers
  • ~40% of payment is made upfront to the drivers as fuel advances and the remaining 60% is paid after payment is received from end clients.

CredAble Solution:

  • CredAble onboarded ABC as a client for bill discounting
  • CredAble discounts the invoice as soon as it is submitted to Amazon.
  • On Day 30, when Amazon pays, CredAble recovers its principal and interest and remaining balance flows to ABC.
  • After a couple of cycles, , the cash-to-cash working capital cycle was reduced to 40 days from a peak of 70 days.
  • CredAble proposed a solution to fund the supplier based on receipt of a weekly MIS report from Amazon. In efforts to further reduce the supplier’s cash to cash cycles to as little as 7 days.

Testimonial from ABC Private Limited

CredAble has helped us enhance our business and has been a growth partner helping us to scale to new heights. We have been able to get new business as the CredAble financing helped us unlock the equity deployed in our operations. With MIS enabled funding by CredAble, we could scale our operations by 2x as the hindrance of operational costs like fuel, tolls, driver wages, etc. will be taken care of through the financing availed. We look forward to working and growing with CredAble over the coming years

CredAble understands nuances in different sectors of business and  can work with vendors to determine the frequency of financing and is typically based on milestones which may include:

  • Bill of lading (BL)/e-way based: Daily, weekly financing based on BLs raised
  • GRN / POD based: Daily, weekly, monthly financing based on GRN / PODs received
  • MIS based: Daily, weekly, monthly financing based on receipt of client approved MIS

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