U.S. Bancorp is partnering with the niche financial technology company LiquidX in an effort to supercharge the growth of its supply-chain financing business.
The partnership will allow U.S. Bank’s parent company to give business clients that have been pinched by supply-chain issues during the pandemic a more dependable cashflow stream, the bank said Tuesday.
Using LiquidX’s system, the $587 billion-asset bank will essentially buy the receivable contract between a supplier and its buyer as a way to get payment to the supplier faster than it would ordinarily arrive in a system that has been besieged by delays.
Suppliers often have to wait 60 days to receive payment, which can be extended to 120 days in some cases, putting a strain on their finances, said Dan Son, who oversees global trade and supply-chain finance at Minneapolis-based U.S. Bank.
“Because of COVID and supply-chain disruptions, companies are starting to awaken to the fact that these solutions are very, very central to their entire ecosystem,” Son said in an interview. “So there's a lot more demand for these products now. “
Typically, buyers and suppliers would have to execute financing deals with U.S. Bank by manually exchanging Excel spreadsheets and other documents via email, making it difficult for the bank to scale the business.
But LiquidX provides a system where these documents can be uploaded and sorted automatically, enabling suppliers to be paid almost immediately, and giving buyers more time to fulfill the obligation, according to U.S. Bancorp.
The business “can't scale unless it's automated and digitized,” Son said.
While U.S. Bank didn’t disclose how much it will charge clients for the product, the price will be based on the corporate rating of the company that’s making a purchase, Son said.
Jim Toffey, CEO of LiquidX, said in a statement that the partnership “will make it easier, faster, and cheaper for U.S. Bank and its corporate clients to transact.”
The partnership could mean billions of dollars in growth, Son said. U.S. Bancorp has forecast continued loan growth during 2022 after posting a 3.4% quarter-over-quarter increase during the first three months of the year.
“It’s not a let's-grow-5% type of thing,” he said. “We're talking holistically, billions, in terms of throughput. We certainly have a desire to grow in multiples. That's the scale we're looking at.”
