Demand for Supply Chain Finance (SCF) is soaring, as the Covid-19 slowdown continues to place a squeeze on firms’ liquidity. Though a boost for the industry, ratings agencies are warning that the trend could prove dangerous.
Steven Van der Hooft, founder and chief executive of Capital Chains – a Netherlands-based consultancy firm that works with corporates, financial institutions and FinTech platforms on their SCF arrangements – says: “The underlying question is why a bank would withdraw a line of finance. If the line is being pulled because the industry, the sector or a specific supply chain is doing badly due to coronavirus, then no matter what product you would have had – Supply Chain Finance, regular factoring or whatever – those lines would have been pulled.”
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