Crisis Raises Concerns Surrounding Supply-Chain Financing

Supply-chain financing does not appear on a companies balance sheet except as trade debt or accounts payable, which can make it difficult to evaluate the degree to which a company is exposed.

An article in the WSJ detailed the threat this poses using the collapse of Carillion PLC as an example. The company reported ~$500 million to ~$600 million of supply-chain finance obligations as “other payables,” which represented a far larger sum than the net debt balance of 219 pounds.

The lack of transparency makes exposure difficult to analyze, but as liquidity shrinks with declining revenues the growing concern is that lenders may not renew these offerings at a time when businesses need them most.

debt overleveraged
Source: Jean Eaglesham | "Supply-Chain Finance Is New Risk in Crisis" | The Wall Street Journal | 04/04/2020 | Visit