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Denmark's supply chain finance programme offers $55bn working capital

Tuesday 12th May, 2020

Tradeshift is working with the Danish Export Credit Agency (EKF) to open up much-needed liquidity to businesses in Denmark through a technology-driven supply chain financing model.

Under the model developed by Tradeshift in collaboration with EKF, banks will be encouraged to offer favourable credit lines to large organisations with export turnover in order to pay their suppliers earlier. EKF will underwrite these lines of credit.

The Danish initiative, which has been endorsed by leading academics including Professor of Economics at Aarhus University Philipp Schröder, is being touted as a cost-efficient alternative to government-backed loans and stimulus packages designed to help ease liquidity pressures placed on businesses as a result of COVID.

The dramatic slowdown in trade over the past two months has seen many larger organisations extend payment terms to suppliers. According to one recent study, late payments to UK suppliers have shot up by 23% since 11th March.

This clogging up of cash flow is putting major pressure on otherwise healthy businesses, and risks slowing down dramatically any potential bounce-back after the current conditions lift. The problem has been made more serious as traditional trade finance insurers threaten to pull out of the market and government-issued ‘helicopter relief’ money struggles to flow to businesses that would most benefit.

“The immediate payment scheme has the potential to become a vital support package for companies during the corona crisis. Not only is the economic potential inherent in itself, it also avoids the behavioural death spiral, where all companies in a value chain withdraw their payments simultaneously,”says Tradeshift’s co-founder and SVP, APAC, Mikkel Hippe Brun.

By targeting the top 250 large buyers in Denmark, Tradeshift claims that up to $55bn in working capital can be made available to suppliers between in Denmark from June 2020, to June 2021.

As the technology partner in Denmark, Tradeshift will help businesses deliver the necessary visibility into these transactions to enable the system to roll out rapidly and at massive scale. Businesses that rely on paper-based invoices will not be able to access the program.

Tradeshift is currently in discussions with a number of governments across the world who are considering the model as a way to make working capital available to businesses.

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