Investment Finance – Bid Invest
On April 26, the Mexican Business Council (CMN) together with the Inter-American Development Bank (IDB Invest) will grant loans to 30,000 micro, small and medium enterprises in Mexico. It will be supported by the Ministry of Finance and Public Credit, the business sector and the international financial organization reached an agreement to facilitate the financing of production chains and support Msmes in Mexico.
This agreement is based on financing through reverse factoring, which means that the buyer of goods pays his supplier in advance, through a factoring company or bank, known as the Factor. That is, the factoring customer is the company that serves as buyer of goods, who makes his purchases and goes to the Factor window to find liquidity with his supplier. The buyer receives payment of its receivable account for part of the factor and eventually the buyer will pay the factoring company within the prescribed period at the end of the invoice.
Antonio del Valle Perochena, president of the CMN, gave details of how it will work and some answers to possible frequently asked questions from interested parties.
- Does the IDB Invest put these 12 thousand Mdd or does the CMN also put money?
The immediate financing of BID Invest will be 250 Million Dollars in investment factoring lines for Mexican corporations that complement the 300 Million Dollars in lines of this type that BID Invest has already placed in Mexico, with the objective of increasing up to 3 billion dollars with the collaboration and incorporation of foreign investors, commercial banks and local development.
- How will these credits and supports operate?
The product facilitates supplier financing at a very competitive cost, providing liquidity to the supply chain. The operation of these credits is carried out through an electronic platform in which the purchasing company, the supplier and the bank interact. The bank issues loans on suppliers’ invoices, previously authorized by buying agents. The electronic platform makes it possible to quickly and easily deliver advance payments to suppliers, with a discount at market rate, leaving the collection of the original invoices to the bank.
- Who and how will the credits be granted?
The supplier makes the request for credit directly to BID Invest through the electronic platform. The credit given is backed by an invoice authorized by the purchasing company.
- How can Smes access this funding?
The Msmes suppliers will be able to access this financing, once enabled by the purchasing company, through the electronic platform used by BID Invest.
- What is the interest rate?
Financing offers attractive and competitive variable interest rates. The specific fee is established on the basis of the characteristics of each transaction.
- What is the term of the loan?
The average term is equivalent to the payment times set by the purchasing companies. Typically, this is why the periods are less than 90 days.
- Has there been a previous effort between the IDB and the CMN?
This is the first such effort between the IDB Invest and the CMN. However, several Mexican companies, some related to the CMN, are actively involved in this factoring program offered by BID Invest.
Having all the information regarding this type of financing from my point of view, I can say that the following points should be considered for any company that is interested:
- It is for medium-sized and large enterprises that their income and supply capacity is considerable. We can consider as additional data that the investment amounts that BID Invest has range from 600 Million Pesos to more than 1 Billion Pesos.
- It is not a traditional credit line, as it is an inverse factoring. That is, we offer our goods to buyers for immediate liquidity, we have as intermediary a Factor and this is the one who will make the payment.
- We would have to consider whether we have the proper supply of goods and Logistics to make the corresponding deliveries.
Bandala | Díaz | García is constantly updated on the legal-economic developments that are happening in our country. And we are ready to give you more information regarding this type of financing.