What We Do
Helping clients navigate the challenges of optimizing working capital is at the foundation of our business, where we provide a comprehensive suite of solutions tailored to meet each client's specific objectives. These solutions are developed by our Working Capital Solutions team, a group of specialists who work together to create a seamless offering that best meets the needs of each client. Working in conjunction with colleagues and in close collaboration with each client, our product specialists design and develop services and solutions to meet client objectives.
Today both Buyers and Sellers are looking for ways to improve their working capital. Some may look to reduce financial or payment costs, while others may look to generate free cash flow, or incremental liquidity by speeding up their cash conversion. Solutions to accomplish these objectives include Supply Chain Finance and Dynamic Discounting.
Increasing or decreasing one of the levers in the cash conversion cycle equation can improve working capital. Some may look to minimize DIO or DSO by discounting their receivables, or increase DPO by holding onto their cash longer and extending payment terms.
What is Supply Chain Finance?
Supply Chain Finance helps Buyers strengthen relationships with their Suppliers by providing them with access to economically priced short-term funding. And our proprietary technology platform provides both Buyers and their Suppliers with insight into payments and payment history.
How Supply Chain Finance Works For You
- A Supplier sends goods/services to a Buyer and submits an invoice
- The Buyer sends the approved invoice to MUFG
- MUFG discounts the approved invoice and pays the Supplier net proceeds
- At invoice maturity date, the buyer pays the full approved invoice amount to MUFG
Benefits for Buyers
Supply Chain Finance Programs help Buyers to:
- Drive sustainability of supply chain
- Strengthen relationships with Suppliers
- Streamline the payment process
Benefits for Suppliers
Supply Chain Finance Programs help Suppliers to:
- Turn Accounts Receivables into cash faster at an attractive rate
- Improve working captial metrics to support your growth
- Access remittance information via dedicated Supplier portal
Frequently Asked Questions
Q: Why choose MUFG Supply Chain Finance?
A:
Suppliers choose the MUFG Supply Chain Finance program for reasons including:
- Improvement in Days Sales Outstanding (DSO) through early payment on approved invoices at attractive rates
- Working capital benefits to support growth without increasing their leverage
- An additional source of liquidity when bank credit tightens during lean economic cycles
- Visibility into invoice approval and remittance information on an electronic platform
Q: How is the discount fee to purchase receivables determined?
A:
MUFG determines the discount fee based on the invoice amount, the period the receivable will be outstanding, and the MUFG price. The MUFG price is comprised of a base rate plus a margin.
Q: How often does the base rate change?
A:
Depending on your home country and currency of the transaction, the base rate will vary, and may change daily.
Q: How long does it take to enroll in the MUFG Supply Chain Finance program?
A:
Once MUFG has received all of the required forms and agreements, information, and documents, we will endeavor to have you up and running, with full access to the system in a timely manner.
Q: When will a Supplier start to receive payments?
A:
A Supplier would begin to receive payments after being notified that all MUFG-required documentation has been submitted and approved for the SCF program, and providing eligible invoices were approved by the Buyer for payment.
Q: For questions during the onboarding process, who should a Supplier contact?
Q: What if I sign up and then change my mind?
A:
According to the terms of our contract, you may terminate your participation in the MUFG Supply Chain Finance program at any time by providing appropriate written notice.
Q: Does a Supplier need to have an MUFG bank account to participate in the MUFG Supply Chain Finance program?
A:
No, an MUFG bank account is not required to participate in the MUFG Supply Chain Finance program. Funds will be deposited into the Supplier’s existing bank account.
What is Dynamic Discounting?
Dynamic discounting gives Buyers the flexibility to choose when to pay their Suppliers in exchange for a lower price or discount on goods and services purchased. The “dynamic” component refers to the option to provide discounts based on the date of payment to suppliers.
Unlike supply chain finance where the Buyer uses a bank to execute early payment, with dynamic discounting, the Buyer uses their own excess cash to provide early payment.
For example, if a Buyer’s standard payment terms are 60 days, a Supplier may be open to providing a discount if a Buyer would pay in 15 days. The bank calculates the discount amount and tells the Buyer how much to pay on the invoice.
By providing early payment directly to a Supplier, a Buyer achieves a higher return on its excess cash compared to placing their cash in short term investments yielding a lower return.
For a Supplier, dynamic discounting may be more beneficial than standard discount terms because it allows the Suppler to get paid when the Buyer approves the invoice for payment. So, the Supplier receives payment quicker, for a small discount, and is able to reduce their Day Sales Outstanding (DSO), positively impacting their own cash conversion cycle.
How Dynamic Discounting Works For You
Benefits for Buyers
Dynamic Discounting programs help Buyers to:
- Use excess cash to self-fund the program and increase EBITDA
- Lower Cost of Goods Sold or SG&A expense
- Positive return on short term cash averages 10-12% yield
- No significant upfront cost, within year ROI
- Improve Supplier loyalty
- Provide Suppliers access to economically priced short-term liquidity
- Help sustain growth and contain sourcing costs
- Gain visibility into and automation of Supplier payments
Benefits for Suppliers
Dynamic Discounting programs help Suppliers to:
- Increase cash flow and improve liquidity
- Lower Accounts Receivables
- Reduce Day Sales Outstanding through early payment discount
- Free up credit lines and diversify cash sources
- Better cash flow planning
- Get visibility into approved invoices & payment timing
- View remittance details for each payment
- Access information online or download into Excel format
- Short term liquidity typically more cost effective than a Supplier’s cost of debt
Frequently Asked Questions
Q: Why choose MUFG Dynamic Discounting?
A:
Companies choose MUFG to help them utilize excess cash to self-fund a dynamic discounting program that will increase their EBITDA,
lower their cost of goods sold, and improve loyalty with small- to medium-sized suppliers, to meet their working capital objectives.
Suppliers choose the program for improved cash flow, reduced Day Sales Outstanding, and simplified enrollment and onboarding
with no lien search requirement.
Q: How is the discount on an invoice determined?
A:
MUFG works with a Buyer to predetermine the discount amount. Suppliers are notified of the discount amount based on the Buyer’s invoice approval timeline.
Q: How long does it take to enroll in the dynamic discounting program?
A:
Once MUFG receives the required signed documents, we will endeavor to have you up and running, with full access to the system
in a timely manner.
Q: When will a Supplier start to receive payments?
A:
Suppliers would begin to receive payments after being notified that all required signed documentation has been received and approved, and providing eligible invoices were approved by the Buyer for payment.
Q: For questions during the onboarding process, who should a Supplier contact?
Q: What if my company signs up and then change our mind?
A:
You may terminate your company’s participation in the program at any time by providing appropriate written notice.
Q: Does a Supplier need to have an MUFG bank account to participate in the program?
A:
No, an MUFG bank account is not required. Funds will be deposited into a Supplier’s existing bank account.