“I thought Hallelujah” says Roland Hudson about the moment he came across URICA’s unique offering. Mr. Hudson is CEO of Interpower, an established British manufacturer of power generation equipment.
The company builds generators for the oil and gas industry, hospitals and key industries where emergency power is required. Deliveries can be up to a year. The design can take several months, and from order to completion, Interpower will see a flow of components coming in and cash flowing back to its suppliers and its workers. To support this massive undertaking, Interpower has to guarantee it will get paid for the project in a timely and regular way.
Mr. Hudson turned to URICA during a search for products that would support Interpower’s cash flow as banks, bruised by the financial crisis, have made it difficult to increase credit facilities to businesses.
“My contracts can some times be in the millions of pounds and my suppliers need to be happy. That means when goods come in that I can pay for them,” he explains.
As some items are custom made, suppliers can require a deposit when an order is placed.
Providing the client is proved credit-worthy according to URICA’s partner insurer, Interpower uploads selected invoices onto URICA’s global online platform, has it electronically signed by the customer and then receives payment from URICA within 24 hours. The customer then pays URICA according to their preferred timeline and terms.
Unlike many other ways of securing financing, such as bank loans, no security or guarantee is required to use URICA, so you can hold on to the roof over your head should any transaction go awry. Even that situation is accounted for, however, with the client always having the option to challenge an invoice, resolving any potential disputes before they become a bigger problem.
Working with its bank, Interpower had previously tried several methods that might help payment cash flow. These included letters of credit, an avalised bill of exchange, a deposit made with the order followed by the remaining monies before the goods leave the factory and payment 30 days on account, trusting the customer will pay.
These were expensive – bank charges on a letter of credit are around 1.75% for Interpower with the customer paying 2% at their end – so both parties were taking the hit. Avalised bills of exchange are not popular as the customer has to arrange with his bank and the banks are reluctant to take on the credit risk. Deposits and 30-day payment on account place the credit risk onto Interpower. Another route – invoice discounting – does not guarantee payment, making it of no value to Mr. Hudson.
Things become more challenging when a number of large and often complex contracts come to Interpower at any given time, with the company’s hands tied by a limited overdraft. As banks push to reduce credit facilities and put more pressure on the working capital of businesses, this problem has become a common one, observes Mr. Hudson.