More NewsWal-Mart Offers Faster Payment Option to Vendors

Wal-Mart Offers Faster Payment Option to Vendors

Wal-Mart Stores is offering its clothing vendors a faster way to get paid that could change how struggling retailers and vendors do business together. The store told 1,000 clothing suppliers that they can be paid within 10 to 15 days of delivering goods instead of the customary 60 to 90 days. According to Wal-Mart spokesman John Simley, the new option lets vendors present their bill to a bank, which pays the vendor, then gets paid by Wal-Mart.

Aite Group senior analyst Nancy Atkinson said:”Wal-Mart is not immune to suppliers’ financial difficulties with financing raw materials or in-process manufacturing. Through the economic crisis, banks’ lending was greatly constricted due to a shortage of capital and the economic impact on suppliers’ credit worthiness. When banks will lend to suppliers, it is generally at 50 to 100 basis points above the lending rate they would apply to a strong credit rated buyer.

“As a result, I expect Wal-Mart is leveraging their credit standing to allow suppliers to receive funds from banks at reasonable rates. They are likely using the approach of alternative supply chain financing, where the buyer’s credit rating is being applied because the bank knows when Wal-Mart will be making the payment and for how much in advance. The bank is, therefore, willing to pay the invoice at a lower discount than if they had to rely on the supplier’s credit rating alone.”

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