In Trade Finance Funding Solutions, It’s Important to Know the Details

As a global leader in working capital and trade finance funding solutions to global businesses, Finacity has found that it’s important to know the details.

The company tracks and reports in detail on about 60 million individual receivables annually. It also tracks every payment. Was it paid or not paid? Was it paid on time? Was it paid in full? Was it dilution? It also tracks the reason codes behind dilution. Was it a product defect? Was it a volume discount?

Finacity tracks bank account activity, too. If a client reports to the company that a receivable made a payment, Finacity validates that by seeing that payment in a bank account.

“This is very, very intensive,” Finacity CEO Adrian Katz told PYMNTS. “It’s not the glamorous part of the business, but it’s extremely important. If you look at major fraud events in the receivables/payables space, they invariably have resulted from constituents not knowing the details, not having control over the details.”

Value

When White Oak Global Advisors completed the acquisition of Finacity Sept. 20, it said it will work closely in a number of areas where there are synergies, including White Oak deploying institutional capital on Finacity’s platform.

Read more: Asset Manager White Oak Buys Trade Finance Firm Finacity

Following the acquisition, Katz remains Finacity CEO and substantive equity holder, working closely with the leadership of White Oak Global Advisors.

Katz explained that the fraud-detection capability built into the way Finacity operates in tracking payments makes its funding community much more confident.

“Our structures and our disciplines have, if you will, kept everybody safe,” Katz said. “We actually think that’s often not something that people focus on, but we think it’s an extremely important part of the value we bring to these types of transactions.”

Solutions

Finacity originates, structures and places over $100 billion in trade finance receivables yearly with over 50 leading financial institutions (FIs) in asset-backed security structures. Finacity has facilitated transactions for receivables denominated in 58 currencies with obligors in more than 175 countries.

“That level of transparency that we can bring to the clients and to the funding community often makes a deal possible that otherwise might not be,” Katz said.

The company’s services are broadly applicable to large investment grade clients, large non-investment grade clients and smaller clients.

Clients choose these solutions for three reasons.

One is the all-in cost. Are they getting a better priced source of funding than the alternatives? While the price will vary from investment-grade clients to non-investment-grade clients, Finacity works to deliver the better price for each.

“Either way, we have to be competitive across the credit spectrum,” Katz said.

Another reason clients choose these solutions is maximizing proceeds from the collateral or receivables that are used.

“For us, that can come in different forms and shapes,” Katz explained. “For example, our ability to accommodate multinational pools of receivables can be a differentiator.”

A third factor is risk mitigation. Depending on the details of the structure, there can be more or less risk mitigation.

“If a company has a credit department that says it can only have $100 million of exposure to this customer, this obligor, you do a securitization that monetizes a good portion of the exposure, then they could actually do more sales to that very same customer,” he said.

Collaboration

Following the acquisition, White Oak will benefit from Finacity’s capability, core competence and market understanding.

“For White Oak, they’ve now acquired some very unique skills, technology, relationships, etc., that I am confident will be able to be leveraged and very helpful to the sort of asset management goals that White Oak has and its origination goals as well,” Katz said.

For its part, Finacity will now have a funding partner that has capabilities that might be interesting to its existing clients and future clients. The core of what Finacity does will not change, however.

In addition, when talking to corporate CFOs and treasurers, Finacity will now have the capacity to offer services that it couldn’t have in the past. Similarly, White Oak may encounter opportunities that are a better fit for Finacity’s platform and capabilities.

“I think we’ll both have an opportunity to originate transactions and sort of share it with each other — ‘Hey, is this a good fit for you? Is it a good fit for me?’ That kind of thing,” Katz concluded. “I think we’ll see one plus one is more than two in terms of the type of collaboration.”