Supply chain finance

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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

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