Supply chain finance

Simply defined, supply chain finance (SCF) is an arrangement whereby:

• A supplier of goods or services is able to obtain finance
• Based on the existence of a receivable due from the purchaser of those goods or services.

If the arrangement is non-recourse to the supplier then the funding will be based on the credit standing of the purchaser.

In this simple sense, supply chain finance is a form of invoice discounting, but is usually distinguished by the fact that there is a well structured scheme or arrangement to facilitate that invoice discounting, very often involving electronic invoicing, record keeping or communication.

Defined more broadly, supply chain finance can be viewed as:

• The use of financing and risk mitigation techniques
• To improve the management of the working capital and liquidity invested in supply chain processes and transactions.

See also

• Dynamic discounting
• Factoring
• Finance
• Forfaiting
• Invoice discounting
• Liquidity
• Non-recourse
• Payments and payment systems
• Physical supply chain
• Receivables
• Reverse factoring
• Risk mitigation
• Supply chain management
• Working capital
• Market-based approaches to cash management and liquidity

Other links

• Masterclass: Supply chain finance, Will Spinney, The Treasurer