Supply Chain Finance | 2021 Supply Chain Finance (SCF) Guide

An introduction to Supply Chain Finance (SCF) / Payables Finance

Trade Finance Global / Supply Chain Finance | 2021 Supply Chain Finance (SCF) Guide

Supply Chain Finance | 2021 Supply Chain Finance (SCF) Guide

Welcome to the TFG Supply Chain Finance (SCF) and Payables Finance hub. Find out about how we help corporates and large businesses access supply chain finance programmes, or keep up to date with the latest research, information and insights on supply chain finance.

What is Supply Chain Finance?

Supply Chain Finance (also known as SCF, payables, reverse factoring and supplier finance), is a cash flow solution which helps businesses free up working capital trapped in global supply chains. Supply Chain Finance has recently been defined as a much broader category of trade financing, encompassing all the financing opportunities across a supply chain. Notwithstanding, the product is still very much seen from a narrower perspective, where its key feature is that it is buyer/debtor driven. In such a case, a buyer approaches its financial provider for the establishment of a receivables discounting line for its suppliers to use and discount the invoices they issued to that buyer.

It is a solution designed to benefit both suppliers and buyers; suppliers get paid early and buyers can extend their payment terms. This solution allows businesses which import goods to unlock working capital as well as reduce the risk associated with buying goods in bulk and/or transporting them globally. SCF is generally defined as ‘an arrangement whereby a buyer agrees to approve his suppliers’ invoices for financing by a bank or other financier’.

The term Supply Chain Finance (SCF) is often also referred to as

Given that there are no ICC rules for SCF (like there are for Letter of Credit or Incoterms), it’s often up to each provider to decide what they call it.

Despite the publishing of the ‘Standard Definitions for Techniques of Supply Chain Finance‘ by the International Chamber of Commerce in 2016, the definition is not yet widely adopted and providers of SCF often use various terms to describe their product offerings.

Receivables finance on the other hand, is well defined as ‘the purchasing of receivables or invoices from a seller, with or without recourse’.

In order to address some of the common issues and misunderstandings around SCF, we have put together this short guide.

Diagram: How does Supply Chain Finance work?

How can Supply Chain Finance benefit my business?

SCF is a very efficient way to underpin the stability of a Buyer’s supply chain and market reach vis-a-vis its suppliers, allowing it to benefit from better credit terms and streamlined invoice payment procedures (supply chain finance tends to be made available through online platforms). It is also very beneficial to suppliers, as it allows them to shorten their receivables cycle and therefore reinvest their operational cash-flow at a faster pace. The advantages also tend to include financing in better terms for both parties, as suppliers don’t need to take out financing under their own credit lines and may benefit from their clients’ access to credit at lower rates, and buyers may get credit from their suppliers at a lower cost than that of taking out a loan.

Benefits to buyers/ importers

  • Buyers can maintain a healthy balance sheet
  • Buyers maintain a good relationship with suppliers
  • Promotes competition/ diversity in suppliers
  • Allows buyers to make purchases in bulk to save costs
  • Buyers can work with complex end-to-end supply chains
  • SCF doesn’t disturb existing bank relationships or overdrafts

Benefits to suppliers/ exporters

  • Suppliers can get paid earlier than their usual 30-day credit terms
  • Little financial risk – insurance is sorted through a supply chain financier
  • Doesn’t cost the supplier any extra
  • Allows supplier to have the cashflow to work on numerous deals simultaneously
  • Helps provide liquidity and reduces financing costs

How can we help?

The TFG supply chain finance team works with the key decision-makers at 270+ banks, funds and alternative lenders globally, assisting companies in accessing trade & supply chain finance.

Our international team are here to help you scale up to take advantage of trade opportunities. We have product specialists, from machinery experts to soybean gurus.

Often the financing solution that is required can be complicated, and our job is to help you find the appropriate trade finance solutions for your business.

Read more about Trade Finance Global and our global team.

 

Get started – talk to our team

Contact Information

If you have a supply chain finance enquiry, please use the contact form.

Otherwise, you can reach us on the email addresses below.

Trade Finance Global
201 Haverstock Hill
Second Floor
London
NW3 4QG

Telephone: +44 (0) 2071181027

Supply Chain Finance Enquiries



Want to learn more about Supply Chain Finance?

Look no further. We’ve put together our feature trade finance insights, research and articles, and you can catch the latest thought leadership from the TFG, listen to podcasts and digest the latest in international trade right here.

From the Editor – Supply Chain and Payables Finance Insights

VIDEO: On the red carpet – ITFA Chairman Sean Edwards on changes in global trade finance after COVID-19 Last week, at the ITFA Annual Conference, TFG’s editor, Deepesh Patel, sat down with Sean Edwards, chairman of ITFA.
Bank of America, IBM see opportunity in delivering post-pandemic, digital trade finance solutions Our editor, Deepesh Patel sat down with Geoff Brady and Madhav Goparaju from Bank of America and Chris Doroszczyk from IBM to discuss the impact of COVID-19, access to finance and technology.
Swipe right for trade finance – TFG launches new ‘Trade Finance’ app Today we have launched our new ‘Trade Finance’ app on iOS and Android. With over 160,000 monthly readers, our app aims to help the trade community make sense of the world of international trade and finance.

Videos – Supply Chain Finance

Supply Chain Finance Podcasts




Supply Chain Finance – Frequently Asked Questions

Who can use Supply Chain Finance?

Currently, supply chain finance programmes exist predominantly in Western European and US markets, but Asian markets are quickly following suite, particularly India and China. Chief Financial Officers are beginning to include supply chain finance as part of their working capital and treasury agendas. Despite being around for over 70 years, supply chain finance is now being transformed by digital innovation. Proprietary software and technology platforms work with banks to automate and provide instant rates and terms which suit both parties. Payables data will typically get uploaded to a supplier platform and suppliers can immediately approve invoices and see invoices before they mature.

Supply chain finance is great for large corporations or SME suppliers/ buyers. Whether you’re looking to import automotives and vehicles or retail stock such as clothing, supply chain finance is an innovative solution which the UK government fully supports and encourages.

How can Trade Finance Global help your business access supply chain finance?

At Trade Finance Global, we are experts in providing insight on global supply chain and trade finance. In addition, we have a network of expert funders and advisors who have helped SMEs and businesses access finance to import and export goods or services worldwide. We work with you to find out what your business requires.

Our specialists work with leading funders and banks to offer you the most competitive rates; simply get in touch using the contact form below, and briefly let us know what you’re looking for. Alternatively, find out more about supply chain finance by reading some of the articles we have put together above.

How does Supply Chain Finance work?
  1. A Supply Chain Finance facility is entered by the buyer, financier and supplier
  2. Goods are shipped and sales invoice is raised on the buyer by the supplier
  3. Supplier submits invoice to financier’s supply chain finance platform
  4. Buyer approves the invoice on the financier’s supply chain finance platform
  5. The financier pays the supplier, excluding interest and fees.
  6. The financier debits the account of the buyer on the maturity of the invoice

Strategic Partners:

Get in touch with our SCF team



Download our free SCF guide



Latest News

26Oct

How can CFOs and treasurers adapt to new Supply Chain Finance disclosure requirements?

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Steven Lauricella explains the five things CFOs and Treasurers need to know about the new regulations, and how alternative solutions can be... Read More →
19Oct

Sustainable supply chains: an accelerator to boost sustainability goals?

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The magnitude and pressure around climate change and the United Nations (UN) agenda can give an opportunity to make a... Read More →
19Oct

PODCAST: Sibos special – BAFT’s Tod Burwell on a century of trade and transaction banking

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We have just completed the marathon that is virtual Sibos - a festival of trade, treasury, and payments. So what... Read More →
15Oct

VIDEO: On the red carpet – ITFA Chairman Sean Edwards on changes in global trade finance after COVID-19

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Last week, at the ITFA Annual Conference, TFG’s editor, Deepesh Patel, sat down with Sean Edwards, chairman of ITFA.... Read More →
15Oct

Bank of America, IBM see opportunity in delivering post-pandemic, digital trade finance solutions

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Our editor, Deepesh Patel sat down with Geoff Brady and Madhav Goparaju from Bank of America and Chris Doroszczyk... Read More →
14Oct

Swipe right for trade finance – TFG launches new ‘Trade Finance’ app

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Today we have launched our new ‘Trade Finance’ app on iOS and Android. With over 160,000 monthly readers, our app... Read More →
14Oct

Contour partners with Shenzhen FinTech Institute of the People’s Bank of China to increase trade digitisation across Asia

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Contour, the digital trade finance network, announces partnership with the Shenzhen FinTech Institute, a subsidiary of The People's Bank of... Read More →
12Oct

New Standard Chartered research shows companies in Europe, North America are doubling down on supply chain resilience

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New research from Standard Chartered has found that environmental, social and governance obligations are top of mind for corporates... Read More →
12Oct

BREAKING: Global trade finance gap hits new all-time high of $1.7tn due to COVID-19

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Global trade finance gap hit a new all-time high of $1.7 trillion in 2020, eclipsing its previous high of $1.5... Read More →
11Oct

Sibos Live – Bank of America to speak live on the state of global trade

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TFG announce a Tradecast with Bank of America, covering the impact of the pandemic on international trade and trade finance,... Read More →
11Oct

TFG Weekly Trade Briefing, 11th October 2021

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Your morning coffee briefing from TFG. Inflation concerns intensify as cost of energy soars, Boris Johnson reluctant to issue more... Read More →
04Oct

Is Digital Identity the key for unlocking MSME access to Trade Finance?

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04Oct

Helicopter view: Barclays, on creating sustainable supply chains and trade finance

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Trade finance as an asset class has benefitted from developments in loan and debt capital markets, which have led the... Read More →
30Sep

ADB supports Sanoat Qurilish Bank’s fast-growing base of SMEs with $16.6m credit agreement

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The Asian Development Bank (ADB) and Sanoat Qurilish Bank (SQB) signed a revolving credit facility agreement. The funding which comprises... Read More →
29Sep

ICC Trade Register 2021 – 6 top takeaways and the low-risk nature of trade finance as an asset class

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The 2021 ICC Trade Register summary, on the credit risk profiles of trade finance, supply chain finance and export finance... Read More →
10Sep

Announced: Optimizing the chain: supply chain 4.0 Tradecast

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The TFG / Finastra's tradecast will explore how corporates are reacting to new levels of volatility, and ultimately, how technology... Read More →
06Sep

Exports of intermediate goods rise 20% in first quarter 2021

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Global exports of intermediate goods such as parts and components rose 20% year on year, latest World Trade Organization (WTO)... Read More →
03Sep

The fusion of working capital solutions in developing a sustainable financing strategy

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Never have fragmented reactions, as seen to recent global crises, be that Covid-19, climate change or geopolitical power shifts, illustrated... Read More →
03Sep

The impact of the M.V. Ever Given incident on traders – New risks on the horizon

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The impact of the March 2021 incident of the container ship M.V. Ever Given with around 18,300 containers onboard running... Read More →
11Aug

HSBC is the first bank to join Walmart’s inclusive financing initiative

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HSBC is the first bank to join Walmart’s initiative to improve access to working capital for diverse and minority suppliers... Read More →
11Aug

Ocean Partners Secures Increase in Syndicated Borrowing Base Facility

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Privately-owned base metal trading company successfully renews and increases its Syndicated Uncommitted Secured Revolving Borrowing Base Facility. London, 11th August... Read More →
09Aug

IPCC issues stark climate change warning – but what about trade?

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Today's IPCC report warns that temperatures are very likely to reach 1.5°C of warming by 2050. But what could this... Read More →
03Aug

ESG, fraud and managing risk: How Veridapt is using tradetech to change commodities for good

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TFG’s Joana Fabiao, had the opportunity to sit down with David Thambiratnam, CEO of Veridapt, a global force in commodity... Read More →
26Jul

FMC creates a program to review detention and demurrage practices

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The Federal Maritime Commission (FMC) has created a new program that aims to review the detention and demurrage practices of... Read More →
23Jul

CDC provides USD 50 million trade finance facility to help close trade finance gap in Africa

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United Kingdom development finance institution (DFI) CDC Group is providing a USD 50 million trade finance facility through Ecobank International... Read More →
21Jul

IASB demands more disclosure on Supply Chain Finance

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The supply chain finance industry has been faced with a choice: increase disclosure or continue to face criticism.... Read More →
19Jul

VIDEO: 21st Century Supply Chain Finance – reinventing the wheel or back to the drawing board?

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TFG’s editor, Deepesh Patel had the pleasure of speaking with Stacey Facter from BAFT, Christian Hausherr from Deutsche Bank AG... Read More →
08Jul

Lies, Damn Lies, and Tradetech/ESG – What’s next for the future of trade finance?

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Deepesh Patel, Editor at TFG summarised the key themes discussed during ICC Mexico's three-day virtual event on The Digital Future... Read More →
08Jun

US$2.5 million investment into Stemly to enable accelerated growth and to pave the way for an independent future

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TFG Partners with TXF for Global Commodity Finance and Global Trade Virtual 2021

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About the Author

Trade Finance Global (TFG) assists companies with raising debt finance. While we can access many traditional forms of finance, we specialise in alternative finance and complex funding solutions related to international trade. We help companies to raise finance in ways that is sometimes out of reach for mainstream lenders.

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