Michael Harte, Director, Head of Open Account, Lloyds Corporate & Institutional.
- Challenges around global trade are prompting corporates to reconsider how they manage their working capital.
- Inventory is a strategic asset that can be financed and optimised through inventory finance, which unlocks trapped liquidity, strengthens supplier relationships, and reduces supply chain disruption.
- Integrating decisions into the finance and physical supply chain offers businesses agility and a competitive edge.
The international trading environment continues to show signs of variability. Whilst interest rate pressures in the UK and US have eased, in others – like Japan – they’re on the rise.
With the compounding effects of inflation, supply chain challenges and evolving trade patterns, working capital remains a critical lever for large corporates. The role of supply chain finance and receivables finance is well-documented and in full use by many treasurers as they look to strengthen supplier networks and resilience.
However, after years of being a niche product offered by smaller, specialist financiers, Lloyds has launched an inventory finance solution to give clients a much-needed additional working capital tool.
The new supply chain reality
Geopolitical events, evolving trade policies, regional challenges, and the pandemic have all exposed new considerations for the just-in-time model. That model has worked in stable conditions. But we operate in dynamic times.
Corporates are holding more inventory and changing their supply chains, often moving into unfamiliar jurisdictions. This change in direction and approach incurs cost, bringing procurement, treasury and operations even closer together than before with one objective: making every pound of liquidity work harder across the supply chain.
Why active working capital management matters
Having cash is paramount to remaining agile, but having resilient supply chains often means sacrificing liquidity for diversification. Sustainable and active working capital management isn’t just about squeezing longer terms or chasing payment.
In a fluctuating market, CFOs and suppliers are required to collaborate and take dynamic steps to ensure harmony across the cash conversion cycle – aligning inventory, production and supplier terms directly into working capital decisions.
This approach enables corporates to release trapped cash and preserve balance-sheet flexibility. In practice, it means using data from enterprise resource planning (ERP) systems, supplier portals, and logistics feeds to anticipate pinch points before they become funding shortfalls. It also means recognising that inventory itself is an asset class that can be optimised, financed, and leveraged.
Inventory finance: The hidden lever
Inventory is regaining prominence as a versatile asset class that can be optimised. Inventory finance is a tool for bridging physical and financial supply chains. By collaborating with suppliers, large corporates can increase liquidity without compromising operational control and minimise disruption across the supply chain.
For buyers, inventory finance provides the capacity to increase stock or secure critical components without exhausting cash reserves. It can stabilise production schedules, capture bulk-buying discounts, and mitigate supply issues.
For suppliers, especially small and medium-sized enterprises (SMEs) reliant on maximising their working capital, it can strengthen the overall supply chain and mitigate counterparty risk for buyers.
A strategic advantage in tight credit conditions
Inventory finance offers a balanced approach to working capital, aligning buyers and suppliers, payables and receivables, all while increasing resilience across the supply chain. By fostering this collaboration, inventory finance goes beyond liquidity, supporting stronger supplier relationships.
With variable trading conditions, inventory finance facilitates strategic purchases, allowing CFOs and procurement teams to react to changes quickly without consuming short-term liquidity. That agility is becoming a competitive differentiator.
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Today’s supply chains demand more than operational efficiency – they demand financial adaptability. Active working capital management, supported by innovative tools such as inventory finance, allows CFOs to turn liquidity into a strategic advantage.
As the boundaries between finance and supply chain continue to blur, those who integrate the two will be best positioned to navigate market fluctuations, capture opportunities, and build the resilient, capital-efficient enterprises of the future.
Sponsored by Lloyds
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Lloyds and Lloyds Bank are trading names of Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 0207 626 1500.
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