Finance Suppliers

Supply Chain Financing can also be known as Supplier Financing or Reverse Factoring. The term “supply chain” in this context is used to refer to a “Large Buyer” company that is being supplied by numerous smaller “Supplier” businesses. “Supply Chain Financing” refers to the opportunity provided to the supplier businesses, under one umbrella arrangement that has been initially set up by the “Large Buyer” at the top of the supply chain.

An example of how a business may use our Canadian supply chain financing company would be where a supermarket chain is purchasing products from a wide range of smaller suppliers. The supermarket will arrange an agreement with an independent finance company or financial institution such that all of their suppliers have the option of accessing finance under the umbrella arrangement. This is often provided at rates that more reflect the size and credit strength of the supermarkets business rather than the size of the individual supplier businesses. The suppliers benefit from the arrangement since they are usually able to access financing at rates lower than they would typically be able to achieve on their own.

Arrangements For Supply Chain Financing

Currently, most examples of this type of arrangement are programs that have been established by major multi-national companies partnering with large financial institutions (banks). The bank carves out a portion of the customer’s approved credit facility and sets up a “Payables Financing” program in order to secure discounts from the suppliers in return for quick payment. These programs work when two situations hold true:

  1. The “Large Buyer” has significant credit strength and borrowing power and can carve out this portion of their facility without any negative affect on their day-to-day cash flow.
  2. The discounts being secured are greater than the cost of borrowing and implementation of the program

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