imported>Doug Williamson |
imported>Administrator |
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| Simply defined, supply chain finance (SCF) is an arrangement whereby:
| | A synthetic financial instrument is a combination of two or more instruments, designed to replicate the cashflows from another instrument. |
| *A supplier of goods or services is able to obtain finance
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| *Based on the existence of a receivable due from the purchaser of those goods or services.
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| If the arrangement is [[non-recourse]] to the supplier then the funding will be based on the credit standing of the purchaser.
| | For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of: |
| | i. A spot foreign exchange contract. |
| | ii. A borrowing in one of the currencies; and |
| | iii. A deposit of equal maturity in the other currency. |
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| 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.
| | == See also == |
| | | * [[Arbitrage]] |
| | | * [[Foreign exchange forward contract]] |
| Defined more broadly, supply chain finance can be viewed as:
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| *The use of financing and risk mitigation techniques
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| *To improve the management of the working capital and liquidity invested in supply chain processes and transactions.
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| ==See also== | |
| * [[Dynamic discounting]] | |
| * [[Factoring]]
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| * [[Finance]] | |
| * [[Invoice discounting]]
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| * [[Liquidity]]
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| * [[Non-recourse]]
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| * [[Payments and payment systems]]
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| * [[Physical supply chain]]
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| * [[Receivables]]
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| * [[Risk mitigation]]
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| * [[Supply chain management]]
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| * [[Working capital]]
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| * [[Market-based approaches to cash management and liquidity]]
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| ===Other links===
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| *[http://www.treasurers.org/node/8986 ACT breakfast briefing: supply chain finance, May 2013]
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| *[http://www.treasurers.org/node/8745 Masterclass: Supply chain finance, The Treasurer, February 2013]
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| [[Category:Trade_finance]]
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A synthetic financial instrument is a combination of two or more instruments, designed to replicate the cashflows from another instrument.
For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of:
i. A spot foreign exchange contract.
ii. A borrowing in one of the currencies; and
iii. A deposit of equal maturity in the other currency.
See also
