It could doÂ a little bit of both.
Even though invoice factoring has existed for hundreds of years, it is still dwarfed by traditional forms of financing such as bank loans. Wal Mart gives the industry the boost of credibility and legitimacy it needs.
BusinessesÂ may be more receptive knowing that a large company like Wal Mart is in the industry. The Wal Mart brand name could make invoice factoring more appealing to businesses, who might have otherwise never thought about it as a funding option.
Wal-Mart plans to offer about 1,000 of its suppliers the opportunity to participate in its Supplier Alliance program, according to a story in the Wall Street Journal.
The program will allow suppliers to receive payment for their orders in 10 to 15 days as opposed to the traditional 60 to 90 days. It would allow suppliers to sell their invoices to Wal Mart’s partner banks, Wells Fargo and Citibank. The banks would offer interest rates tosuppliers based on Wal Mart’s credit rating and the banks would collect payment from the retailer.
Â Wal Mart’s foray into invoice factoring follows the Chapter 11 bankruptcy protection filing of invoice factoring giant CIT Group Inc. earlier this month.Â
Will Wal-Mart Corner The Invoice Factoring Industry?
The program is small for now, but some are worried that Wal Mart might use its retail power — it is the largest retailer in the country — to dominate the factoring industry.
The concern: Wal Martâ€™s AA credit rating is particularily attractive to suppliers, who will most likely get lower rates with Wal Mart than theyâ€™ll getÂ elsewhere.
Only time will tell the effect of Wal Mart on invoice factoring.