B2B Payments

North Of The Border, Securing The Supply Chain

SMEs need access to capital, especially when it comes to securing goods and services needed for their own expansion. As eInvoice payment firm Aztec Exchange’s CEO Edwin Hagan-Emmin explains, a new pact with EDI brings choice beyond traditional factoring to Canadian SMEs.

Cash in hand is better than the cash you’re waiting to receive. Cash in hand improves cash flow and keeps corporate operations, large or small, humming.

To that end, Aztec Exchange, which is a global supplier of invoice finance tools, and Canadian firm EDI Gateway, have commenced a partnership where the former’s early eInvoicing payment service, known as “PayMe,” is being offered to the latter’s Canadian suppliers and clients.

In an interview with PYMNTS, Edwin Hagan-Emmin, CEO of Aztec Exchange, stated that traditional financing models, such as factoring, rely on banks and smaller firms needing to focus on the “financial concept of recourse vs. non-recourse” debt.  This means, he said, firms must put up collateral, typically equipment.

The problem with factoring, the executive told PYMNTS, is that it works best when companies have working capital and scale, as scale means they have a greater base of physical assets against which to borrow, and can borrow greater sums of money from banks and other lenders.

Their businesses, backed by greater access to financing, can thus grow at an outsized pace. Thereafter, factoring and recourse financing, which also feature relatively long approval processes, require consistent monitoring of balance sheet strength on the part of the lender.

The question remains as to what smaller firms can do to access similar pathways to growth. For Aztec, which operates on a non-recourse model, buyers can secure their supply chain while at the same time getting paid a bit sooner on outstanding invoices, which gives a boost to cash flow.

Hagan-Emmin told PYMNTS that the early payment model hinges on the creditworthiness of the buyer, rather than the supplier (which sells the invoice to Aztec Exchange for early payment), regardless of whether trade financing is being conducted or invoices are being paid singly, with discount charges accruing to suppliers along with a transaction fee. Suppliers submit invoices online for which they want early payment and can track payment progress across a variety of devices, including mobile devices and tablets.

Speaking about the Canadian market in particular, Hagan-Emmin stated that the movement into the country comes in the wake of already being available in Canada, Mexico, Chile, Europe and parts of Asia.  He told PYMTS that he remained “surprised that there has not been more competition versus factoring,” and that the financing option of eInvoicing and early payment, as a business model, has the potential for “disruption” among SMEs in Canada. The advantage is one where, simply an executive at an SME, via technology, “can press a button and get paid,” with payment coming within hours.

Transitioning to an (always on) interactive exchange, stated the executive, means that early payment becomes an entrenched component of cash flow management. “Once a supplier understands this [interface with EDI for invoices] exists, they do this with other countries and in other markets.”

He noted that smaller firms in Canada — in, say, energy or manufacturing — seek to expand their market reach but may find challenges in place when it comes to getting appropriate levels of working capital in place and also satisfying the compliance requirements (such as know-your-customer [KYC] mandates and tax regulations) that come with cross-border transactions, satisfied with EDI processes.

Such expansion is easier, said Hagan-Emmin, aided by multiple sources of financing as firms move beyond their initial, Canadian-focused borders, as there “is 100 percent coverage of a supply chain.”

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