100% of the value of the invoice (typically amounts up to $18m)
Depends on your payment terms (e.g. 30, 60, 90 or 120 days)
Fee varies according to the lender, the amount and your buyer's credit rating
Within a day
To ease cash flow and improve liquidity so you (the supplier) can increase sales or mange seasonal cycles – you may also want to extend your payment terms
Any business (supplier) with a confirmed purchase order, especially if your buyer has a better credit score than you
Supplier finance (also known as ‘supply chain finance’ or ‘reverse factoring’) is a type of business cash advance, similar to invoice finance. If your business is the seller (or supplier) then you can benefit from the higher credit scores of the buyers in your supply chain. Your buyers can also lengthen their payment terms without impacting your cash flow.
If you need cash (working capital) to increase sales or manage your seasonal cycle, but are hampered by your credit score, supplier finance (supply chain finance) could help you. From the lender’s perspective, if your business has a credit-worthy buyer (a large, multinational, say) then the buyer is likely to honour your invoices and it can access capital (borrow from a lender) at a lower cost.
Supplier finance works like this:
It’s advantageous all round. Your cash flow is stabilised because you (the supplier) get paid within a few days, rather than waiting for the ‘payment due’ date (which could be as long as 90 or 120 days). And the buyer benefits too, because they have effectively extended their payment terms without negatively impacting you – and without touching their working capital. In other words, the lender takes on any payment delay.
Supplier finance comes with a limitation: your supplier financing company can buy products on your behalf only up to the amount that your business can be credit insured. So you might not be able to use supplier finance for very large orders. You might want to consider purchase order finance, which is also ‘pre-delivery’.
That said, supplier finance has two main advantages over PO finance: