May 16, 2019   SOURCE: PR NewsWire

Swiss-funder ADF Introduces Alternative Financing Solutions to Floor Planning in the US Technology Industry

ZUG, Switzerland, May 16, 2019 /PRNewswire/ -- Floor Planning has been broadly adopted in the IT industry in the US to finance the purchase of equipment from technology Original Equipment Manufacturers (IT OEMs) by Distributors. For IT OEMs, distribution is their principal route to market, hence, they establish Floor Planning programs to promote sales through the distribution channel and usually absorb the cost.

Pros & Cons of Floor Planning

The main advantages of Floor Planning are the sales growth generated for the Seller and the improvement in cash flow for Buyers obtained cost-free. However, Floor Planning has some drawbacks:

    --  "Handcuffing" of Buyers' assets, as they are required to pledge a
        substantial amount of assets as collateral, limiting their growth
        potential.
    --  No balance sheet benefit for Seller as Floor Planning does not generate
        working capital benefits nor cash flow advantages.
    --  Repurchase commitment from Seller, which implies an increase in
        contingent liabilities as it is committed to repurchase the goods in
        case of re-possession by the Funder due to non-payment from Buyers.
    --  Disadvantageous tax implications for US Sellers, as Floor Planning
        interests are considered as debt financing charges, which has a negative
        tax impact given the Tax Cuts and Jobs Act (2017).

Supply Chain Finance as an alternative solution

SCF comprises various types of programs for financing companies' working capital. Receivables-based Distribution Financing and payables-based Growth Financing are ideal alternatives to Floor Planning as they overcome its main weaknesses. "In particular, Distribution Financing with benefits for both, Seller and Buyers, is a proven sales-enhancing solution successfully implemented by numerous IT OEMs in multiple jurisdictions", comments Kendall Stevens.


                                                   
     
       Floor Planning 
     
     Distribution Financing 
     
       Growth Financing




       "Handcuffing" of Buyers' assets                
        YES                
            NO             
            NO

    ---


       Balance sheet benefit for Seller               
        NO                
            YES             
            NO

    ---


       Repurchase commitment required from Seller     
        YES                
            NO             
            NO

    ---

Read full report: Floor Planning in the IT Industry: Why it should come to an end

Alternative Distribution Financing Ltd. (ADF), part of the GSCF Group headed by Global Supply Chain Finance Ltd. (GSCF), specializes in Distribution Financing and Growth Financing for global IT OEMs and their channel partners worldwide.

Alternative Distribution Financing Ltd., Switzerland

Lucia Cardellino, +41-41-922-2222, info@gscf-adf.com

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SOURCE Alternative Distribution Financing Ltd. (ADF)