CFOs Are Pricing Working Capital Assets Separately

The most consequential change is not the financing products themselves. Factoring and asset-based lending have existed for decades. What is changing, the report said, is the information available around them. Treasury systems and ERP platforms now generate live signals. Payment networks add data on payment behavior and inventory movement. That allows financing to be tied to what is actually happening inside the business.

The corporate revolver, the report said, may be the biggest loser. A company that borrows at a revolver rate to finance a pool of high-grade receivables is paying for flexibility it does not need. The convenience of the revolver, which does not require a company to specify which operating need caused the draw, comes at a cost.

Banks that integrate lending with treasury data have an advantage. FinTechs may compete by specializing in narrower asset classes, underwriting faster or creating better data connections into ERP systems.

Companies that improve invoicing and reconciliation can lower their financing costs directly. Forecasting also helps. The report noted that extending supplier terms can cosmetically improve working capital but simply transfer financing costs into the supply chain, where they may return through pricing.

The question for CFOs is shifting from how much liquidity the business needs to what each dollar of liquidity should cost. The PYMNTS data showed that firms using external working capital solutions freed an average of $19 million, money redirected toward supplier relationships and growth.