Myths about Flexible Funding, Basel III and Supply Chain Finance

As Basel III moves into sharper focus for banks, plenty of misconceptions about its impact — and the disruption it will create — have arisen. In fact, some commentators have stated that Basel III will represent a sea change for banks when it goes live. The reality is more nuanced.

Myths about Basel III
Let’s take a look at three common myths about Basel III.

Myth 1: Banks are going to put pressure on treasurers for more ancillary business because Basel III makes it harder to get returns on traditional lending.

This myth is often tied to the idea that Basel III changes the way banks look at revolvers. The theory here is that revolvers were once a standalone product that met bank risk-adjusted return on capital (RAROC) goals on their own, but Basel III changes that calculus for banks. While it is true that banks face new capital rules, the reality is that revolvers have been a “gateway” product for more than 20 years.

Although a revolving credit facility (RCF) term sheet will rarely mandate ancillary business, ask any treasurer about that expectation and you will hear that there’s an expectation for additional business. In fact, many developed countries have regulations specifically precluding banks from demanding ancillary business as a quid pro quo for extending credit.

However, banks can make business decisions on extending credit based on their holistic relationship with a client, and whether they meet the bank’s established economic return targets. That is specifically permitted. It is that exception that drives banks to cross sell using their greatest asset – money – to drive the returns to all their stakeholders, including shareholders, employees, depositors and investors. Few banks are interested in doing a revolver by itself, and that was true a decade ago as well. Basel III has not changed this.

Myth 2: The go-live of Basel III will introduce significant changes.

The reality is that banks have known about Basel III for some time and have faced many challenges in becoming adequately prepared. Most banks have been working with Basel III capital treatment for the last two years, and are already making credit decisions based on the new risk-weighted assets.

In practice, regulatory adoption of Basel III is already mostly implemented. However, the challenges lie with implementing on time across various jurisdictions and standards as well as with certainty of the cost of impact. With that, many banks are also looking ahead to a potential Basel IV on the horizon.

Myth 3: Basel III decreases credit appetite for supply chain finance.

Banks have a significant concern that Basel III will choke off the supply chain finance (SCF) market. That risk is probably overstated. While there are reasons to worry for the future — more on this in a moment —supply chain finance will be fine. In particular, there are two positive things about SCF with regards to capital treatment.

First, SCF is uncommitted, which by nature, reduces the overall cost of capital. For example, if a funder offers a 5-year $500M committed RCF, the lender is charged capital on $500M regardless of the drawdown amount. Non-utilization fees help reduce this cost. In contrast, if a bank or group of banks are willing to write $500M of SCF, then the bank only pays a material capital charge on the outstanding amount, because it is uncommitted. All things being equal, SCF facility of equal size and return compared to a revolver, should yield a better return on capital.

Second, SCF is appealing under Basel III because it is a short-term risk. As a result, both the probability of default and the loss given default are low for less than 12 months risk on a typical client (e.g. mid to global corporate). This, in turn, brings down the hurdle on capital returns. The banks PrimeRevenue works with like SCF because of its short-term credit profile coupled with the creation of what is typically a long-term predictable revenue stream, as once suppliers start trading their invoices, they tend to continue.

Basel III has forced return on capital to the forefront of credit decisions, so what we are actually seeing in the market is an increased demand for SCF as an asset class amongst banks.

What does the future hold for supply chain funding?

None of this is to say that Basel III is not a big deal — it is. But the major impacts were telegraphed long ago, and smart firms are already moving to position themselves effectively. Far from restricting access to funding for SCF programs, Basel III can actually make it more viable for the right type of borrowers.

The caveat with the SCF side is that the benefits from uncommitted capital may change over time. Just as banks understand the benefits of uncommitted capital over committed capital and the associated return boost, regulators do as well.

As a result, a number of regulators and internal compliance groups are now requiring capital (far less than a committed line) to be held even against uncommitted lines. This trend started with Australian banks, and it’s been trickling through U.S. banks as well. However, there are arguments that Basel III requirements may actually encourage banks to offer more uncommitted lines in the U.S. and give banks a better process for maintaining high-quality liquid assets. As a result, the appetite for SCF and other uncommitted lines is likely to increase in correlation. This is a trend to keep an eye on going forward.

For interested firms that need access to supply chain finance, PrimeRevenue can provide an option for a company to use its own cash or third-party cash — sourced from 55+ funders — to fund a supply chain finance program.

By Mark Douglas
Published March 5, 2018

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Stephanie Wargo

VP, Global Head of Marketing

Stephanie joined PrimeRevenue in 2015 and oversees the company’s global marketing team and strategy. With a data-driven approach, Stephanie focuses on demand generation and thought leadership to drive brand awareness, strengthen client/partner relationships, and generate new sales opportunities. Stephanie has guided PrimeRevenue through new technology releases and an evolving FinTech landscape. In addition to leading PrimeRevenue’s internal and external communications, she implemented innovative demand generation and marketing strategies to enhance the company’s overall sales pipeline.

Stephanie has extensive experience in marketing and customer success. She previously served as Vice President of Marketing and Communications at BitPay and Vice President of Client Relations and Marketing at FirstView Financial. Stephanie earned a B.A. degree in Political Science from Agnes Scott College in Decatur, Georgia.

Brian Medley

VP, Global Head of Sales

Brian joined PrimeRevenue in early 2012, after more than 20 years of sales leadership, executive-level consultant and business growth experience. As VP, Global Head of Sales, Brian leads a growing team of fintech sales professionals with a focus on developing strong customer relationships, improving sales predictability and helping PrimeRevenue enter the lucrative mid-market.

Prior to PrimeRevenue, Brian honed his enterprise software sales leadership skills at Clarus Corporation. He also served as an operations and IT management consultant for Kurt Salmon Associates. In addition to his sales and consulting background, Brian has deep experience in the financial industry having founded a successful residential mortgage broker and lending business. He is a graduate of the Georgia Institute of Technology having earned a B.S. in Industrial Engineering and Economics and M.B.A. in Global Business.

Jason Green

SVP, Global Customer Success

Jason joined PrimeRevenue in 2021 following more than two decades in the fintech/financial services industry. He brings a strong background is sales leadership due to his impressive relationship building capability as well as a successful track record in creating structure and process improvements. In his role, Jason uses his keen attention to detail to strengthen the customer experience and enhance the company’s solutions to deliver more value to clients.

Prior to joining the company, Jason held several senior level and executive roles with a focus on building and scaling sales and support organizations at both large and small companies. Jason graduated from Murray State University with a B.S in Marketing.

Matt Ford

SVP, Global Product Innovation

Matt joined PrimeRevenue in early 2015 and is responsible for overseeing all commercial, strategic and operational aspects of PrimeRevenue’s supply chain finance offerings throughout EMEA, based in Prague. He has been instrumental in gaining global alignment and developing supplier enablement processes for the region.

Matt joined PrimeRevenue following a 15-year career at Morgan Stanley, where he worked in fixed income operations covering debt syndication through bonds, EMTNS, corporate loans and other debt securitization. Notably, he set up non-core location operations in Europe (Budapest) and all lending operations in Baltimore from scratch.

Matt, who was born and raised in South East England, earned a B.S. in Sports Science at University of Teesside where he mastered the art of TEAM development and accountability as a youth international rugby player.

Dominic Capolongo

EVP, Global Head of Funding

Dominic joined PrimeRevenue in 2016, and is responsible for leading our bank and capital markets funding strategies and execution. He focuses on building global, scalable and highly efficient funding structures that maximize options for supporting PrimeRevenue’s programs. Dominic began his career as an attorney and was a partner with Kaye Scholer before joining DLJ as a senior banker. Dominic brings tremendous strategic and capital markets experience in all areas of finance having held senior positions at, among others, Credit Suisse and RBC Capital Markets in addition to DLJ. Dominic earned a JD from Fordham University School of Law and a BA from SUNY Binghamton.

Gavin Cicchinelli

Chief Operating Officer

Gavin joined PrimeRevenue as Chief Operating Officer in 2021. With more than two decades of leadership and executive experience along with a deep understanding of the payments space, Gavin provides a unique focus on improving and strengthening operational strategies and implementing GTM growth execution. He is responsible for leading transformation across corporate and operational strategies as well as building a repeatable and scalable commercial growth strategy that aligns with PrimeRevenue’s core business while delivering key adjacent growth opportunities.

Prior to joining PrimeRevenue, Gavin served as President and Chief Revenue Officer of Integrated Solutions at TSYS, a global payment processing services company acquired by Global Payments (NYSE:GPN). There, he also served as Head of Product and divisional COO. Throughout his career, Gavin has held multiple leadership positions including VP of Sales, SVP of Business Development, and President of Financial Institutions. Gavin graduated from the University of Northern Colorado, Greeley.

David Quillian

Chief Legal Officer

David joined PrimeRevenue as General Counsel in 2007. He and his team have been instrumental in successfully creating the unique legal structures that support PrimeRevenue’s multi-funder model and global funding capabilities. David is also the lead named inventor on PrimeRevenue’s two patents for Electronic Time Drafts, which allow PrimeRevenue to manage supply chain finance programs using electronic negotiable instruments as opposed to accounts receivable. Prior to PrimeRevenue, David was General Counsel at Harbor Payments, which was acquired by American Express (AXP) in 2006, and Magnet Communications, which was acquired by Digital Insight (DGIN) in 2003. He holds degrees in Economics and History from Duke University, and Juris Doctor and M.B.A. degrees from the University of Georgia.

Nathan Feather


Nathan has successfully ushered PrimeRevenue from our very early days as a visionary startup, through the financial crisis to today’s position as a thriving mid-sized leader in the cloud-enabled supply chain finance marketplace since joining PrimeRevenue in January 2006. He was instrumental in recapitalizing the company with an $80M investment led by BBH Capital Partners in 2015. Prior to PrimeRevenue, he held various financial management roles with Ariba, Freemarkets and PriceWaterhouseCoopers. Nathan holds a BS in Accounting from Pennsylvania State University.

PJ Bain


PJ has an impressive and accomplished track record as an enterprise software entrepreneur and executive. PJ has built a solid record of success with PrimeRevenue since being appointed Chief Executive Officer in July of 2009. The company has received numerous awards for growth, customer service, innovation, along with being recognized as a top employer.

PJ is a life-long software and technology entrepreneur having been involved in numerous firms in the roles of founder, executive, advisor and investor. Immediately prior to PrimeRevenue, PJ was the VP and General Manager of Exact Holding N.V. (NYSE/AMS: EXACT), a leading global provider of business software solutions. He was previously Founder and CEO of Inspired Solutions, an Atlanta-based, B2B software and services firm that grew to be the largest reseller of Exact Software in North America, later acquired by Exact. PJ holds a Bachelor of Industrial Engineering from Georgia Institute of Technology.