Supply chain finance is a group of financing techniques that use trade transactions and supply-chain relationships to improve working capital for buyers or suppliers. Programs may finance approved payables, receivables, inventory or pre-shipment activity. The financing trigger and party whose credit supports pricing depend on the technique.
How does Supply Chain Finance work in practice?
The buyer confirms approved payables to a finance provider or platform. Participating suppliers can request early payment at a disclosed price, while the buyer pays on the original or agreed maturity date. The structure uses the buyer’s approved obligation to support funding, so approval controls, supplier choice and accurate payment data are essential.
What records support Supply Chain Finance?
Record the eligible transactions, approval event, finance provider, advance, discount, due date, settlement route and treatment of disputes or credits.
What does Supply Chain Finance not establish?
The label is broad. A buyer-led payables program and a supplier-led receivables sale create different legal, accounting and operational outcomes.
Reference: the IFC Global Supply Chain Finance program.
