Supply Chain Finance

What is Supply Chain Finance?

Supply chain finance is a key financial tool for medium to large businesses, typically with a turnover of over £30M. If you are looking to improve your working capital by both extending and unifying the credit terms you get from your suppliers, whilst retaining their trust and support, then supply chain finance is the answer.

Whilst you, the buyer, benefit from the extended credit terms, your supplier benefits from an early payment option. No longer is the buyer and seller in competition but rather a collaboration that benefits both parties.

As a buyer, you no longer need to spend time waiting for high quality suppliers who are able to delay their payments to their suppliers, in order to improve their own capital base.

In times of financial crisis, supply chain finance is seen as the great hope for keeping many small and medium sized businesses liquid and maintaining a healthy economy in the long run. 

Organisations such as J Sainsbury, Nestlé, Syngenta, retailer Metro and truck manufacturer Volvo, all use this practice effectively to increase their working capital and My Invoice Finance can ensure the same opportunities are open to you.

How Supply Chain Finance Works in Practice

Using a case study such as J Sainsbury, it is easy to highlight just how simple the supply chain finance process can be.

A group as large as J Sainsbury are able to squeeze their suppliers for incredibly preferential credit terms, improving its own working capital but sometimes at the expense of those they owe money to.

However, as soon as these invoices are approved, the suppliers of such organisations can simply access their invoices online and then liquidate the monies they are owed, by selling their debt on to the supply chain finance provider.

This means, for the cost of the bank fee, the supplier gains access to their funds up to three months earlier than they would expect payment. It is then up to the bank to wait for the final cash.

It’s a ‘Win-Win’

The term ‘Win-Win’ is commonly used within supply chain finance as it can ensure that everyone achieves their goals.

The supplier and creditor are both able to improve the working capital status within their business, by working with preferential credit terms.

Similar to the common practice of factoring, but cheaper, supply chain finance provides a fast financing option for your suppliers, without the need for collateral. Such a process can improve cash flow through the business and the economy.

As the supplier is able to use the buyer’s credit rating on these pre-confirmed invoices when selling them onto the bank, the risk associated with the transaction is significantly lower and the associated cost is therefore significantly reduced.

For more information about supply chain finance, contact one of our specialist team on 0800 009 6106 or

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