SUPPLY CHAIN FINANCE
What is Supply Chain Finance?
Supply chain finance is a convergence of several working capital solutions in the business financing domain. However, it has its focus on invoice finance and trade finance. It enables businesses to pay the suppliers without any delay so that there is no disruption in the production and delivery schedule. It also allows enterprises to benefit from early payment discounts by the suppliers.
Entities involved in supply chain finance offer extra working capital funding to enterprises enabling them to settle the supplier invoices until they receive their due payment from the clients/consumers/customers. The time frame for supply chain finance is up to 180 days.
What are the Essential Features of Supply Chain Finance?
Supply chain finance improves the cash flow for businesses, ensuring consistent growth, minus any disruption due to late payments. The salient features of supply chain finance can be listed as:
- It covers any cash flow gaps in an enterprise.
- Businesses can cover 100% of the cost of the goods from the suppliers.
- Supply chain finance offers risk protection against Forex by locking in the rates.
- This form of financing requires no security or collateral, relieving the business owner will not have to peg any personal or commercial assets against the loan amount.
- The loan approval rate is high, and the business owner can get fast access to funds.
With Broc Finance by your side, as a trusted finance broker, it will become easy for you to navigate the routes of supply chain finance in Australia. We will make sure to match you with a compatible lender.
What are the Advantages of Supply Chain Finance?
Supply chain finance benefits the buyers (the business owners) and the suppliers. Let’s explore benefits for both:
- There is an instant increase in business cash flow.
- Extends the time limit to clear the outstanding payment up to 60-90 days.
- Improves the metrics of the business balance sheet.
- Supply chain finance does not fall under debt; hence supply chain finance becomes a source of funding off the balance sheet.
- Helps the enterprises to maintain compliance with existing bank agreements.
- Aids businesses in minimizing supply chain gaps or disruptions.
- Allows accessibility to inexpensive financing for the suppliers, backed by the business’ credit rating.
- Suppliers benefit from a reduced time limit for clearance of outstanding payment against the goods.
- There is no assignment of debt over the supplier’s assets.
- Enhances the working capital ratio of the suppliers.
- Improves the metrics on the balance sheets.
Lowers the receivables balance, improving the position of the balance sheet because supply chain payments do not fall under the debt category.
How does Supply Chain Finance Work?
Just like any other form of business financing, supply chain finance follows a definite protocol of application, approval, and funds dispersal, mentioned below: