JPMorgan teams up with Taulia, unlocks trillions of liquidity

JPMorgan Chase & Co. wants to help blue-chip companies release trillions of dollars locked up in corporate supply chains globally through a new technology partnership.

The bank entered a partnership with working capital solutions platform Taulia Inc. to reorganize liquidity to smaller suppliers of large, investment-grade companies. Multinational firms will have the opportunity to pay suppliers sooner with their own cash, or count on JPMorgan’s balance sheet to keep money flowing through the network of providers.

The partnership has been in progress since last fall and now it comes at a good time. Global supply chains have been disrupted with the coronavirus global pandemic forcing governments to take extraordinary measures to shut down large and small businesses. The bank’s global head of trade, Stuart Roberts said that by using the Taulia network, JPMorgan will be able to assist smaller firms in accessing capital at a cheaper rate and faster than otherwise possible.

Stuart Roberts commented:

Stuart Roberts

We’re taking a relatively short-term risk on larger companies. I couldn’t think of a safer way to inject liquidity into a credit-stressed small- or medium-sized business right now.

Taulia Chief Executive Officer Cedric Bru noted that businesses complete over $120 trillion worth of transactions a year and $20 trillion of that are waiting in the supply chain at any point in time. Clients can get on-boarded within 90 seconds, while it takes days or even weeks for small businesses to access credit from local banks at expensive interest rates.

In the last two months, investment-grade companies around the world have accessed hundreds of billions of dollars through bond markets and credit lines at a relatively low cost, while smaller firms have fewer and more expensive options. The U.S. high-yield bond market has opened up but Europe remains quiet. Private credit markets have been inactive.

Current levels of U.S. junk bond spreads remain high at 775 basis points from a peak, double what they were in February, but have compressed from a peak of 1,100 basis points in March. JPMorgan’s global head of structured solutions within global trade, James Fraser, noted that the widening gap caused many companies to lose access to capital.

James Fraser said:

Being able to leverage the strength of a large, investment-grade buyer for a small supplier went from an attractive financing option to a lifeline.

JPMorgan had a legacy tech platform due for an upgrade so the bank looked other partners as well as building its own. The bank ultimately opted for Taulia, considering its AI capabilities.

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