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.
- Dynamic discounting
- Invoice discounting
- Payments and payment systems
- Physical supply chain
- Reverse factoring
- Risk mitigation
- Supply chain management
- Working capital
- Market-based approaches to cash management and liquidity