Supply Chain Finance

Supply chain finance is also known as supplier finance, it is a type of cash advance similar to invoice finance. It uses the credit score of the companies in the supply chain to effectively allow smaller businesses to piggyback on the higher credit scores of their buyers and for buyers to lengthen their payment terms. 

Supply chain finance works by relying on the reliability of larger multinational companies at the top of a supply chain honouring invoices from suppliers. The smaller suppliers can advance 100% of the value on the invoices from a lender for a small fee because there is a low risk of non-payment from the multinational company. 

First stage

The supplier issues an invoice to the buyer.

Second stage

The invoice is approved for payment to the lender and confirmed by the buyer.

Third stage

The supplier advances the invoice value minus a small fee immediately.

Last stage

When payment is due, the buyer pays the lender.

"Supply chain finance is a collaborative process."

Supply chain finance mutually benefits both buyers and suppliers because it helps both parties stabilise their cash flow. Suppliers receive similar benefits to invoice financing in which they are paid within a few days over waiting for extended payment terms. Buyers can delay paying suppliers for longer than average without directly putting pressure on their suppliers, essentially extending their payment terms. Because supply chain funding is based on the buyer's credit rating, the overall cost can be lower. Both the buyer's and the suppliers working capital is left free to use for other business purposes while the lender's working capital is affected. From the supplier's point of view, supply chain finance might seem similar to invoice finance, but supply chain finance is a collaborative process. Both the buyer and the supplier are helped by the lender, and all three parties have an arrangement together.

Every Business is individual therefore we can advise and source the correct funding product your business should be using.

At Winchester Corporate Finance we believe our service offers UK businesses an alternative to traditional bank lending. Supply chain finance is designed for medium to large corporate firms. Our team of experts at Winchester Corporate Finance will be able to answer your questions and guide you throughout the entire process. We value our reputation for transparency and our ability to meet the specific funding needs of the businesses we work with.