29 Jan How AssetChain is Changing the Global Marketplace
In their own simple ways, SMEs play a vital role in the economy—supplying to some of the biggest businesses, generating employment, and pioneering some of the greatest innovations of our time. When the payment for SME’s invoices gets delayed, it just doesn’t cost them time. It costs them missed opportunities to grow and help more businesses and people who rely on what they do. So let me share with you a story that could’ve ended differently, this is the story of Nas.
Nas runs a business with his brother, Alexis, where he purchases grain from farmers in Russia, before cleaning, packing and exporting it to customers in South Africa, Vietnam, Thailand and the rest of Asia. The grain includes wheat bran and wheat bran pellets for animal feed, yellow/red/white millet and safflower seeds for bird feed, wheat flour, flaxseeds, mustard seeds, buckwheat grain.
They have a client in Vietnam to whom they sell Russian wheat bran pellets for animal feed. With a transit time at sea of 45 days, the customer pays Nas’s company 10% in advance and the remaining 90% balance just before the goods arrive to their destination port. Nas’s firm, acting as the intermediary, is required to pay the producer 100% in advance, which creates a liquidity gap of at least 60 days. Nas has to wait for payment before buying new goods.
Generally, when this happens, a business’ knee jerk reaction would be “We need more sales”. Yet the painful truth is, sometimes, in situations like Nas’ more sales might not be the best solution, since the cash flow challenge is coming from a different cause. A business can double their efforts in partnership and sales, but as long as they experience a liquidity gap, they’ll still find themselves waiting for payments before being able to move at their full capacity. This is the economic pain point that Acudeen AssetChain wants to address.
Once the AssetChain is up and running, Nas would enter into a contract with his customer, create an order (PO) and then upload it to the AssetChain. A liquidity provider purchases his order for a discount, giving Nas the funds he needs to grow and develop his business. This frees Nas up to get involved in other projects, such as different cargo types or bigger volumes. The liquidity provider makes a nice profit, Nas’s company gets instant liquidity and the customer gets the goods he needs at the required volumes at the right time.
Traditional instruments are of no help to Nas’ company. While banks need a pledge, other factoring companies require an office in both countries but only rarely have offices in the key markets for Nas’s business: South Africa, Eastern Europe, Vietnam, and Thailand. The struggle to find liquidity to grow his business is what brought Nas to us and it’s entrepreneurs like Nas whom we all want to help.