Supply Chain Finance
Supply chain finance is a win-win funding solution for both the buyer and the supplier – it benefits everyone. A well-constructed supply chain finance program is mutually beneficial in helping buyers free up cash and allowing suppliers to get paid earlier.
The main benefit of supply chain finance is that as the buyer, you do not pay any fee to extend its payment terms and, the supplier only pays a small discount if they want to get paid early.
Supply chain finance positions a company for long-term growth through increased investment in operational, competitive and innovation initiatives, as well as returning cash to shareholders through dividends or stock repurchases.
Improved cash flow
Frees up cash that would otherwise be trapped inside the supply chain, at the same time improving DPO and other financial metrics.
Stronger supply chain
By offering suppliers supply chain finance, buyers may be in a stronger negotiating position and reduce the likelihood of a future supply chain disruption that could affect their operations.
The majority of companies use supply chain finance to accelerate their cash flow, but there are also long term benefits that strengthen the overall fiscal health of a company.
Corporate debt
Leverage ratios
Credit rating
Enterprise rating
Access lower-cost funding
For suppliers, the cost of funding is usually lower than for other funding sources such as bank loans or invoice factoring, making supply chain finance an attractive way of obtaining funding.
Operates as an off-balance sheet transaction
Because suppliers sell invoices outright rather than receiving loans against them, supply chain finance transactions do not appear as a debt on a supplier’s balance sheet.
Improved cash flow
Suppliers can receive payment for their invoices earlier than they would otherwise, reducing their days’ sales outstanding (DSO) and resulting in working capital improvements.
Improve cash forecasting accuracy
When suppliers access supply chain finance, they may gain more certainty over the timing of incoming payments, making it easier to forecast their future cash flows accurately.
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