Supply Chain Finance Methods

Supply Chain Finance

Supply Chain Finance (SCF) solutions aim to optimize cash flow and reduce financial risks for buyers, suppliers, and financial institutions involved in the supply chain.

Invoice Financing

• A type of SCF that enables suppliers to receive immediate payment on their outstanding invoices
• Involves a third-party financier that advances a percentage of the invoice amount to the supplier
• The financier then collects payment from the buyer
• Benefits:
  • Improves supplier cash flow
  • Reduces Days Sales Outstanding (DSO)
  • Increases buyer-supplier relationships

Asset-based Lending

• A type of SCF that uses assets as collateral for a loan
• Assets can include inventory, accounts receivable, or equipment
• Lender provides a loan based on the value of the assets
• Benefits:
  • Provides immediate access to capital
  • Can be used to finance large orders or inventory builds

Reverse Factoring

• A type of SCF where a buyer and a financier partner to provide financing to the buyer's suppliers
• The financier pays the supplier's invoices, and the buyer repays the financier
• Benefits:
  • Improves supplier cash flow
  • Increases buyer's purchasing power
  • Enhances supply chain stability

Factoring

• A type of SCF where a supplier sells their outstanding invoices to a third-party financier
• The financier collects payment from the buyer
• Benefits:
  • Improves supplier cash flow
  • Reduces bad debt risk
  • Increases financial flexibility

Dynamic Discounting

• A type of SCF that allows suppliers to offer discounts to buyers in exchange for early payment
• Discounts are calculated based on the buyer's payment terms
• Benefits:
  • Improves supplier cash flow
  • Increases buyer's purchasing power
  • Enhances supply chain collaboration