Vipal Monga
speaker
72 appearances
2 recordings
1 series
first heard Jun 2018
last heard Jul 2018
Vipal Monga’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Investors Score When Companies Delay Paying Their Bills · 26 Jul 2018
podcast
Trade finance is basically the business of providing loans to suppliers and
who need cash in order to sort of make ends meet until they get paid by their buyers, the big corporations like Procter & Gamble or Stanley Black & Decker.
This is an essential service for a lot of companies.
Think of the small suppliers in China or Brazil.
They need to pay their workers.
They need to pay their utility bills.
And sometimes they might have to wait 30 to 60 days before they get payment from a large company in the United States that's just bought their rubber duckies, if you will.
Without a loan, it'd be really hard for them to continue making enough
of those duckies to make the next shipment.
So it's essential.
This strategy is something that more and more companies are using.
They are aggressively pushing out their payment terms as much as they can.
I've heard in some cases of companies waiting 120 days to pay their suppliers after they've received a shipment.
Now, the companies also realize that they need to fund their suppliers, which is why they use trade finance.
But in the meantime, while they wait to pay the suppliers, they have all this extra cash that they can use to do things like investments or help fund stock buybacks as they wait.
So after the financial crisis, a lot of the regulatory agencies really clamped down on banks lending, if you will.
And they classified a lot of lending that had in the past been sort of due course as riskier.
And trade finance is one of those.
Because it's deemed riskier, the banks have to set aside more capital against the loans.
which eats into any fees that they might make.
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