41% of Latin America Middle Market CFOs Tap Working Capital to Fund Growth

Latin America and Caribbean (LAC) growth corporates, commonly referred to as middle market firms, are setting the pace when it comes to the strategic use of external working capital solutions such as loans, overdrafts and virtual cards.

According to the 2023-2024 Growth Corporates Working Capital Index by PYMNTS Intelligence and Visa, middle market firms in the LAC region lead their North American and European counterparts in the strategic use of working capital, with over 40% utilizing it for planned initiatives to grow their businesses. This has resulted in firms scoring an average working capital index that surpasses their middle-market counterparts in the other regions.

Delving further into the data reveals that the use of external working capital solutions for the sole purpose of advancing business growth through planned initiatives is more pronounced in the fleet and mobility sector. Nearly 60% of companies in this industry cite this as their primary motivator, representing the largest proportion compared to other industries and regions in our analysis.

In contrast, growth corporates in the agriculture sector in LAC are bucking this trend. Only 27% of these companies are tapping into solutions for planned growth initiatives, which is a consistent trend among agricultural firms worldwide that tend to use working capital at higher rates to smooth out expected cash flow gaps.

Moreover, approximately 70% of working capital users in the region reported being better equipped to meet customer demand and seize opportunities, underscoring the importance of working capital solutions in supporting planned growth while reducing capital costs.

Further data suggests that the type of working capital solution used in the LAC region varies across industries. Fleet and mobility growth corporates primarily rely on overdrafts and corporate cards, while commercial travel growth corporates prefer working capital loans and bank lines of credit.

Moving forward, LAC growth corporates plan to increase their use of external working capital solutions for planned growth investments. Virtual cards, which provide an extra level of security for online transactions, are expected to be utilized by 8.1% of firms in the region. Additionally, working capital loans are projected to see a 4% increase in utilization compared to the previous year.

In essence, middle-market firms in the LAC region, contending with challenging economic conditions marked by tight monetary policies and weakening terms of trade, have demonstrated a strong ability to navigate uncertainties through the strategic use of working capital solutions.

This in turn has positioned them as top performers in the region. And with a continued emphasis on operational efficiency, these firms are poised to maintain their leadership position in the market this year.