Supply Chain Financing

If you’re part of the retail, automotive, manufacturing, electronic, or automotive sales industry, then the state of your business probably depends a lot on the efficiency of your supply chain.

The supply chain is the path by which any consumer product is transported and sold from the manufacturer to the consumer. In between are the middlemen which facilitate the process.

As part the supply chain, it’s in your best interests that it works efficiently, but often that’s not the case and problems can arise. For example, you may get the consumer items from a supplier who demands that you pay cash immediately. Meanwhile, your own buyers may take 75 or even 90 days to pay what they owe you in full. This can truly put you in a bind if you suddenly find yourself having insufficient working capital.

How Supply Chain Financing Works

There are many types of supply chain financing (SCF). SCF refers to a broad variety of solution designed to maximize the cash flow of all parties in the chain. You can arrange to have such a solution custom-tailored to your circumstances.

For example, let’s say you’re a supplier to a retail store which pays you in full 75 days after receiving the items from you. The SCF provider can take note of the invoices and you can even track all the invoices approved by your buyers. If you don’t mind waiting, then the money owed to you will be paid on the maturity of the invoice.

But if you want to be paid immediately, then the SCF provider can advance you the money right away. The rates are generally favorable for you, because the risk is based on the retailer’s promise to pay fully on the maturity date on the invoice. You get almost the full value of the invoice, minus the discount charged by the SCF provider for its services.

You can then pick and choose which invoices you want to get your advance payment from. The money can be transferred electronically to your company bank account, and it can take only a day or two to arrive. The retailer then pays the SCF provider on the given date on the invoice.

Benefits of SCF

With the right SCF solution in place, it becomes a true win-win situation for all parties involved. For example, suppliers can get their money much earlier. Meanwhile, retailers can extend their payment terms so that they have ample time to sell their wares.

In the end, everyone can improve their cash flow. Suppliers can use the money to stock upon the merchandise, while retailers can maximize their working capital because they don’t have to pay their suppliers immediately. And if they do, they may even enjoy a discount from their suppliers.

Most SCF solutions are not considered loans at all, so your credit won’t be affected. Suppliers essentially sell their accounts receivable, and all it costs them to get their money in advance is a very small fee.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at