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AIG Eyes The Risk Of Supply Chain Finance

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Credit insurer AIG is making moves to boost its supply chain financing services and has tapped a new partner to do so. Reports Wednesday (Nov. 25) said AIG will be working with supply chain finance platform PrimeRevenue in an effort to provide U.K. mid-market businesses with working capital.

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The companies said in their announcement that the collaboration will link suppliers to faster invoice settlements for a discount, a win-win for both buyers and suppliers. AIG’s credit risk services will facilitate financing to non-investment grade businesses in an effort to fill a gap in access to such trade financing experienced by smaller businesses.

PrimeRevenue Managing Director Richard Tynan reiterated this point in a recent interview with Global Trade Review.

“We’ve been targeting what we believe is a major gap in the market to fund non-investment grade companies,” he told the publication. “They’re still large companies. We’re initially launching this in the U.K., targeting mid-sized corporates. Our target is annual sales exceeding £100 million.”

Reports cited recent research from YouGov that found 17 percent of U.K. business revenue is tied up in outstanding invoices. Research also found expanding payment terms forced on smaller suppliers and rising loss of business.

Tynan added that the partnership will aim to reduce the risk associated with financing these businesses.

“Because we’re moving to non-investment grade companies, the process is to work alongside them and to use trade insurance to help de-risk the transaction,” he explained. “It’s a very rigorous process that’s involved in onboarding due diligence and contractual engagements with all parties on the platform. There’s an awful lot that goes on in the background.”

Moving forward, AIG and PrimeRevenue will look to introduce their supply chain financing services across western Europe and in the U.S. in the coming months.

Through their collaboration, PrimeRevenue’s capital management arm will coordinate transactions with banks, insurance companies and other investment vehicles.

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