URICA, a global early payment network for SMEs, has announced its goal to drive easier access to funding, strengthen supply chains and boost exporting in the engineering sector.
The firm has formed a partnership with the Engineering Industries Association (EIA) that will see URICA offer the opportunity for early payment of invoices without the need to take on debt or provide personal guarantees.
Late payment remains a critical issue for small and medium sized engineering businesses due to their complex supply chains and tight cash flow margins, with many saying that maintaining cash flow is the biggest challenge they currently face which holds them back from expanding or exporting their goods overseas. Whitelaw said that the challenges of late payment for engineering SME's are “very real” and firms lower down the chain are getting increasingly squeezed.
Sir Ronald Halstead, chairman of EIA, said: “The delay in paying invoices is a continuing serious problem for SMEs. Large companies are a problem and this action cascades down the supply chain.”
Launched in 2014, URICA aims to provide a new, less time consuming way of providing SMEs with early cash payment of their invoices without any need for debt, security or personal guarantees. It also hopes to provide their customers with a strengthened supply chain, an opportunity for extended credit and the ability to export goods.
Lindsay Whitelaw, founder of URICA, said: “SMEs are waiting longer to get paid and conventional banking is no longer available the way it was. Invoice discounting hasn't changed in around 40 years and it doesn't meet the needs of modern SMEs. This has seen an increase in the use of credit cards or re-mortgaging property and taking on new debt to solve a problem. Really it is simply kicking the problem further down the road.”
With URICA, suppliers and customers agree trading terms together and the supplier then raises an invoice through the URICA online platform. URICA then runs a check on the customer using global credit insurance partner Euler Hermes and an answer will be provided within 24 hours. If the customer is strong enough they will then pay the raised invoice, with outright cash, less a small early payment discount. Payments can be made as early as the day after invoice date, but usually takes 5-10 days, compared with normal payment terms of often up to 70 days and beyond. The customer then repays URICA on the agreed terms agreed between the customer and supplier, which can be as much as up to 90 days after invoice date.
The broad criteria for customer approval include trading for at least three years and a turnover between £5m-£200m, with a stable financial record. Crucially, there is no credit check required on the supplier. Whitelaw said: “The beauty of the model is that we are not looking at the suppliers’ balance sheets so SMEs can leverage the strength of their customers’ balance sheet instead.”
Some EIA members, said Whitelaw, are already utilising URICA as a means to negotiate better payment terms with their suppliers and customers, including MSE (Consultants), Numill and Interpower International. Whitelaw also said he hoped that SMEs will use the service with international customers to get paid earlier. He said: “SMEs would normally be held back in exporting as they would have to offer extended credit terms to win the business, but by using URICA they can get paid quickly and still offer the necessary credit terms to win the business.”
He added: “We are not saying we will replace over drafts or other credit options but we believe we can be a valuable ancillary product as part of an SMEs financial armoury.”