How do Suppliers and Buyers Profit from Supply Chain Finance

In a study conducted amongst 500 entrepreneurs globally, it was seen that more than 63% suffer from anxiety induced by cash flow concerns. The other rampant issue is the depletion of the working capital. Now, there are various reasons why this might happen, notably if your cash flow is disrupted by supply chain inadequacies. It’s a common cash flow issue highlighted by several Aussie business owners. Nevertheless, you can fix it with supply chain finance. It’s a business financing that benefits both the suppliers and the buyers. How? Let’s explore. (Source: https://www.forbes.com/sites/moiravetter/2019/02/28/new-kabbage-study-shows-the-harsh-reality-of-cash-flow-management-on-owners/?sh=334193d73842)

Define Supply Chain Finance

Supply chain finance is a popular form of business loan that helps an enterprise to release its capital tied up due to supply chain issues. Businesses leveraging supply chain finance have the potential to stimulate the global economy and release working capital worth more than $2 trillion. Here’s a brief rundown of how supply chain finance works.

• In a typical supply chain scenario, there is a buyer and a supplier. The issue arises when the supplier issues an invoice to the buyer, but the latter cannot pay because the money is tied up in its pending invoices. That’s when a buyer can apply for supply chain finance.
• When the supplier seeks payment, the buyer approves the invoice amount, submitting it to the finance company or private lender offering supply chain finance.
• Accordingly, the finance company notifies the supplier about the accounts receivables.
• The supplier can receive payment immediately, get an advance, or agree to payment on net terms.
• Once the funds start coming in, the buyer pays the invoice to the finance company in full.
• If there is any remaining balance, the supplier receives that from the financier.

Benefits for Buyers and Suppliers

Supply Chain Finance has benefits for both the buyers and the suppliers in a business model. Let’s take a look.

Buyer’s Benefits

• The buyer can negotiate/access early payment discounts with the suppliers, thus increasing the cash flow margins.
• It facilitates extended payment terms, giving an instant boost to the cash flow.
• There is a reduced risk of disruption in the supply chain model.
• The timely payment of the invoices helps the buyer to build a trusted business relationship with the supplier and vice versa.

Supplier’s Benefits  

• It enables the suppliers to access better rates.
• Supply chain finance streamlines and accelerates the sales cycle.
• It helps the suppliers by increasing the working capital.
• The suppliers can offer longer payment terms to the buyers/customers.

As you can see, this business financing is a win-win for the suppliers and the buyers. The best part; it does not allow any disruption in the supply chain cycle and prevents the collapse of the same even in a dire crisis.

Wrapping Up!

If you are seeking supply chain finance in Australia, you can connect with a reliable finance broker like Broc Finance. They are the market leaders in facilitating diverse business financing solutions, including supply chain finance for enterprises big and small. Leverage their network of credible lenders to get the cash flow relief you seek for your business.