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Wal Mart Enters Invoice Factoring Business

November 13, 2009 at 8:10 pm

Wal Mart, the nation’s largest retailer, is getting into the invoice factoring business.

It plans to offer about 1,000 suppliers alternative financing, according to an article in the Wall Street Journal. On Nov. 2, Wal Mart rolled out a “Supplier Alliance Program.” It  lets about 1,000 eligible suppliers receive payment for their orders in 10 to 15 days, compared to the traditional 60 to 90 days.

The move by Wal-Mart Stores Inc. follows the Chapter 11 bankruptcy filing of factoring giant CIT Group Inc. earlier this month. CIT is the largest invoice factoring company in the world, funding thousands of small and mid-size businesses, including retailers such as Dunkin’ Brands Inc.

The Wal Mart program will work like this: 

Suppliers can sell their Wal Mart invoices to the retailer’s partner banks, Wells Fargo & Co. and Citigroup Inc.  It will offer interest rates based on Wal Mart’s credit rating and the banks will collect payments from the retailer’s customer, in this case, Wal Mart.  

Factoring A Lifeline For Retailers

The program comes at a time of high anxiety for many retailers, especially during the holiday shopping season. Retailers and suppliers around the world depend on invoice factoring to get cash for their receivables before the items are sold in stores.

CIT Group’s bankruptcy filing narrowly avoided a retail disaster. Many companies have already ordered or received their holiday merchandise.  Meanwhile, CIT plans to emerge from bankruptcy protection by the end of the year and operations have continued.

“We know that many of our suppliers are dependent upon factoring and financing companies that are reportedly in financial distress,” Theresa C. Mercado, Wal Mart’s senior director for product extension, said in a letter sent to 1,000 apparel manufacturers and supliers.

The retailer has about 60,000 suppliers.

Will Wal-Mart Corner The Invoice Factoring Industry?

Wal Mart is a retailing juggernaut that dominates the retail landscape worldwide. Now, some are concerned its latest move will dominate the invoice factoring industry as well and elbow out traditional factors.

Wal Mart’s AA credit rating is particularily attractive to suppliers, who will most likely get lower rates with Wal Mart than they’ll get elsewhere.

For more information about how invoice factoring can benefit your business, visit MDS Funding at http://www.MDSFunding.com, contact MDS Funding at               866-394-4637         866-394-4637 or email CashFlowConsultants@mdsfunding.com.

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