Chairman & Founder
Levantor Capital
SVP, Working Capital
U.S. Bank
Earlier this year, U.S. Bank announced it was deepening its partnership with Levantor Capital to provide new working capital finance solutions to its clients. ABF Journal sat down with Dan Son from U.S. Bank and Mike Humphreys from Levantor Capital for an inside look behind the expanded partnership, program offerings and what it all means for the future of supply chain.
After founding Levantor Capital in 2014, Mike Humphreys recognized the need for a dedicated finance vehicle to truly scale the business and attract funders. Levantor decided to establish its finance vehicle in Ireland. To ensure funders felt secure paying large sums of money to their clients, Levantor sought a custody bank, ultimately choosing U.S. Bank for its extensive trust business and substantial balance sheet. This partnership allowed Levantor to benefit from U.S. Bank’s corporate services, trust management, account management and custody services.
A SYMBIOTIC PARTNERSHIP
In 2022, U.S. Bank’s corporate trust role with Levantor caught the attention of Dan Son, senior vice president, working capital finance at U.S. Bank, and his team as they sought to expand their working capital programs.
“We assessed our clients’ needs and determined that integrating Levantor into our solution toolkit was timely,” Son explains. “Providing more options makes our working capital finance advisory discussions more meaningful. Instead of offering a limited range of solutions that might not fit a particular client’s needs, having a broader selection allows us to better address their specific challenges. More optionality leads to more meaningful discussions.”
Despite its existing relationship with Levantor on the corporate trust side, the U.S. Bank division had to undergo significant internal processes to get to where they are today. Following the announcement of their partnership, Son and his team spent much of 2023 on internal tasks such as approvals, due diligence and vetting to integrate Levantor’s solutions. Once the governing agreements and vetting were established, the two companies worked together to strategize on solutions and value propositions. This included developing the right go-to-market strategy in collaboration with management partners, risk teams and other stakeholders.
“We examined it from the client’s perspective,” Son explains. “Clients don’t necessarily care how things work behind the scenes. They care about their current optimization opportunities, the problems they face and the right solutions available to them. From our perspective, we consider three options: buy, build or partner. These options are not mutually exclusive. In this case, considering the need for an expedited go-to-market strategy and scalability — particularly since we were already fulfilling the custodian and corporate trust roles effectively — we determined that partnering was the most efficient and effective path. One advantage of the Levantor solution, is its simplicity, both in terms of implementation and documentation.”
The partnership provided mutual benefit to both parties. By offering a Levantor solution program, U.S. Bank can offer their customers more solutions, positioning them for future needs and enabling proactive planning. The bank’s long and short-term goal is to offer multiple solutions that keep clients satisfied, capable of sales and adaptable to changing market needs.
For Humphreys and Levantor, strengthening their relationship with U.S. Bank was a strategic move to accelerate their growth in the United States, Levantor’s fastest-growing market. U.S. Bank gives Levantor access to a large pool of clients, amplifying their expanding client base in the United States.
THE NEW PROGRAM
As the creation of the partnership was formed in consideration of the client, so was the structuring of the program offerings, Son says.
“We’ve observed a shift over the past 20 years. Initially, the focus was solely on extending payment terms, often prioritizing an extension from 30 to 90 days without much consideration for the suppliers. The goal was more about increasing the payment window. However, today, while extending payment terms is still relevant, companies also consider the total supply chain ecosystem and supplier resilience as equally important. It’s no longer just about extending from 30 to 90 days; it’s about ensuring supplier health and continuity to maintain an optimal supply chain ecosystem,” Son says.
Son attributes this shift to the supply chain disruptions caused by the COVID-19 pandemic, and the realization for many in the supply chain ecosystem that they are only as strong as their weakest link. Levantor’s structure allows companies to extend payment terms by 30 to 90 days or longer without altering the commercial contract or underlying payment terms with the supplier. Levantor simply pays the supplier on the due date (or earlier) and the client repays Levantor on a pre-agreed future date. The solution is extremely straightforward with limited documentation and electronic signatures. To its knowledge, Levantor was the first to offer electronically signed negotiable instruments. Additionally, Levantor’s finance vehicle is supported by more than 30 funders, including banks and insurance companies, providing U.S. Bank clients with access to new funding sources they wouldn’t otherwise have.
While Levantor’s extended payable solution benefits the buyer, it can also operate in reverse, offering sales finance solutions on the receivables financing side for the supplier.
The supplier can use the Levantor solution as sales enablement with key clients by providing additional payment term extension options without having to change commercial terms with customers.
Another situation the Levantor solution addresses is when suppliers run into credit limits on their buyers. Levantor can step in and pay the supplier on behalf of the buyer, freeing up the credit limit. In other instances, suppliers that want to be paid early will offer Levantor an early payment discount, which the buyer can then use to extend their payment terms to Levantor. “The supplier gets paid early and the buyer gets to pay later than they would otherwise, thereby maximizing the benefit for both parties,” Humphreys explains.
While the program operates smoothly for clients, Son believes the same applies internally. With the infrastructure and client engagement already in place, the remaining work revolves around presenting clients with additional options to consider.
THE SUPPLY CHAIN ECOSYSTEM IMPACT
For Son, introducing the Levantor solution for U.S. Bank clients provided the bank with an opportunity to serve its clients better by offering more options that are simple to implement. He also sees how this partnership impacts the entire supply chain ecosystem, which is complex and does not fit into a one-size-fits-all solution.
“The best way to achieve the right supplier resiliency is to ensure minimal disruptions. Greater optionality caters to the different needs or even the same needs in different ways,” Son says.
When considering the current health of the supply chain, Humphreys believes it is reasonably robust, as evidenced by the effective growth in all of Levantor’s programs. However, he does see an issue around the movement of goods, specifically disruption around transportation rather than production. “The domestic U.S. supply chain seems to be running extremely strongly. We are very active in the technology sector and the volumes of transactions that we’re seeing are robust and strong. I think the movement of goods, certainly from predominantly China, but from maybe Asia generally, is clearly being obstructed by global events, that are slowing things down and adding to pressure on working capital,” Humphreys says.
Son agrees that despite the current geopolitical issues causing disruptions, the supply chain environment has normalized and is working towards further normalization post-pandemic. For him, the core need of optimizing working capital is constant. While most companies put working capital optimization on the back burner during economic downturns, Son believes this is the opposite of what they should do. Instead, optimizing working capital during economic downturns is more important than ever.
Son admits that the supply chain is in a unique environment right now. Interest rates are high, business activity is uneven and inflation is still a concern. However, overall, its health is strong, and the industry has proven to be extremely resilient. Even at the peak of the COVID-19 pandemic when disruptions occurred, such as the Suez Canal event, the supply chain still got through it.
“After everything that’s happened in the last two years, I would say the state of the global supply chain ecosystem is pretty resilient. And I think that’s due, in part, to the various programs the industry has had for many years and companies’ willingness to adopt these solutions and integrate them into their businesses. If we lived in the old days, relying solely on traditional revolving lines of credit and loans, we wouldn’t be where we are today. The diversification and greater access to capital, not just from banks but from the industry overall, have contributed to a healthy supply chain in the grand scheme of things.”•
Erin Rafter is an associate editor of ABF Journal.
