Traditional invoice factoring or receivables financing is a post-shipment invoice-accepted model. In this model:
Our ICF product is a completely different way of freeing up capital in the supply chain that turns inventory into financeable assets. A special purpose vehicle governed by a smart contract takes ‘title’ to the inventory, offers Buyers and Suppliers favorable payment terms, reduces the cost of financing for Suppliers and COGS for Buyers.
There are four main benefits to ICF:
Yes. There are many ways for a Buyer to issue a Distributed Ledger Payment Commitment (DLPC) on our ICF product in lieu of a Letter of Credit or other traditional trade instruments. Below is one example of such a structure. For more information on the DLPC, follow this link.
Encrypts each field of EDI documents such as PO, ASN & Invoice, and chooses which fields the buyer gets to see.
In return, they get early payment based on the buyer’s cost of capital.
Provides a DLPC (Distributed Ledger Payment Commitment) that becomes effective after QA & removal of performance risk.
In return, they get real time visibility & control over inventory in the deep-tier for an agile, efficient supply chain.
ICF transactions can be folded directly into an existing flow of funds or workflow in the supply chain.
Any user can go into ICF and write these workflows.
A party to a financial transaction can use ICF to plan the terms of that transaction and submit a proposal to the counterparties.
The parties can then negotiate the proposal directly on the platform. The history of deal documents and proposals can be referenced at any time.
Once financial terms are agreed to, they are executed via smart contracts.
A financing can apply to one transaction or multiple transactions as part of a master purchase agreement.
DLPCs maintain a history of all actions that have taken place on it. Each action carries with it the appropriate signatures, origin triggers and relevant antecedents for the CorDapps and observers to verify its authenticity.
Skuchain’s DLPC CorDapp is the first implementation of the DLPC standard and interoperability between a Hyperledger Fabric network and the Corda Network.
Enterprises running nodes on the Skuchain EC3 Fabric network submit Purchase Orders from Buyers to Suppliers with directives to create a DLPC for placement on Corda Network.
This is done either via an API call and/or a UI that takes in user input.
The DLPC document has a set of fields based on the best practices published by BAFT. The carveout of the DLPC processes each individual field in the PO and produces a DLPC object, which is sent to Corda Network with the following additional information:
Further actions on the DLPC can be undertaken by the EC3 Agent Node, which acts on behalf of participants who do not have a Corda node, or a counterparty’s Corda node.
Secure attestations allowing for ease of transmission
By placing agreements and trade documentation on the Blockchain, we provide a secure and trustable medium to transmit the details of a trade to various parties.
This allows for portability of transaction information.
Reduced operational friction
Significantly reduced workload
Operators who had to search for, compile and share the same information over and over again to banks, credit insurance companies and transaction participants are now able to streamline the process while adding security.
The transaction process is standardized. There is no need to do an in-depth evaluation of each new transaction.
Scalability and additional profit opportunities
Allows for buyers and suppliers to participate and run transactions of any size on the same platform. Multiple tiers can now be included in the same ICF program, whereas only single tiers could participate before because of the expense and lack of visibility.
Perpetual audit system
All aspects of the trade are now available to be audited in real time by the appropriate parties.
Applicable SKU level traceability can be made available to relevant parties in real time.
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|Interest Rate and Liquidity||
Deep Tier Financing for Working Capital
ICF can turn a Purchase Order into a Distributed Ledger Payment Commitment (DLPC) that suppliers can use to obtain working capital relief during the production process at the end Buyer’s cost of capital. The DLPC may be first assigned to a supplier, and then a bank, to secure the financing. For Tier 2 suppliers and suppliers further upstream, the amount of the PO that may be financed will be determined by the bill of materials for the finished good.
CoverI (for Credit Insurance)
Skuchain’s credit insurance platform, called CoverI, offers a buyer of insurance their own marketplace for putting together policies through a syndicate of insurance companies. CoverI manages the bidding and negotiation process for a new policy. Once such a policy is in place, CoverI allows a company to upload information to the blockchain about performance history on the policy. This information will offer greater visibility to insurance companies about the ongoing risk of policy and open the possibility of much more efficient and dynamic pricing of risk and insurance structures over the life of the program. At the same time, the ability to share this transaction information will dramatically reduce the costs to insurance companies of verifying and paying out a claim, as well as collecting on the defaulted amount from the counterparty.
WIP Financing (Work in Progress Financing)
ICF is extendible across the supply chain and can cover the financing of inventory as it goes through the production process.
Instead of financing their suppliers, buyers can obtain financing for themselves as they sell their products in the market across variable distribution channels.
Disclaimer: Nothing on this website constitutes legal or financial advice. To fully understand the financing structure and legal terms that are the best fit for your needs, please consult your own professional advisers.