Embedded Solutions Tackle SMBs’ Trade Finance Challenges

Small and medium-sized businesses (SMBs) looking for access to trade finance often find themselves frustrated at every turn. As the Organisation for Economic Cooperation and Development notes, they’re often locked out of traditional products, and banks have been slow to roll out their own solutions to address the gap.

But a growing number of FinTechs are entering the trade finance space by either cooperating with banks or operating on a stand-alone basis in the supply chain finance sector, including through the provision of accounting software or invoice management tools and access to finance.

A recently announced partnership between BigCart and the OpenText Business Network is an example of one attempt to make progress on these fronts. BigCart’s payment solutions will now be offered to businesses running OpenText’s cloud-based supply chain management software, giving more than 1.1 million trading partners access to embedded offerings. The value proposition to users is the opportunity to accelerate cash flow and reduce finance costs.

BigCart is a FinTech startup that specializes in secure B2B, custom electronic payment solutions intended to simplify outdated traditional supply chain finance. The company seeks to leverage data to help buyers and suppliers streamline financing and gain access to the competitive financing.

OpenText is an information management company.

“Working with BigCart, the first of our funding partners, OpenText is securely offering our entire trading partner community the ability to source alternative funding opportunities through custom solutions, saving them both time and money,” said Ted Harrison, EVP of global sales at OpenText. “Building on OpenText clients’ existing applications, this new offering can help our partners ensure financial health for their supply chain and strengthen their relationships with suppliers, something we are working to offer even more of for the mid-market in the future.”

BigCart’s B2B financing solution is geared toward SMBs, minority business enterprises (MBEs) and middle-market suppliers, and does not demand a buyer guarantee. Instead, it analyzes existing data through the OpenText Active Access Portal for decisioning.

Facilitating SME Engagement

Access to trade finance can facilitate SMB engagement in trade by addressing two major challenges.

First, both buyers and sellers face significant counterparty risks, when exploring new markets and dealing with new customers and suppliers. This is especially challenging for SMBs that have limited capacities and resources to engage in a sound due diligence process.

Second, SMBs are often constrained in working capital. Buyers and sellers have diverging preferences in respect to the ideal point of time for making the payment. The seller would prefer payment before shipment, or ideally even earlier to buy raw materials, etc., to produce the good or service. The buyer prefers to hold back payment until the proper delivery of the ordered goods and services or later. Access to trade finance solve both parties’ problems, thus ameliorating SMB cash constraints and helping trade flourish.

Digitization has the potential to increase SMB access to trade finance process efficiency and quality, enhancing the portfolio of trade finance instruments, and expanding the field of dedicated trade finance and SCF suppliers. Recent digitization efforts focus on solving know your customer (KYC) and know your business (KYB) frictions.

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