The essential tenet of Supply Chain Financing is to provide a reliable, quick and tailored financing solution that may be applied across a company’s entire supply chain.
How it differs from other traditional forms of financing is that it is usually in the shape of a consistent template that once structured, may be applied to all channel partners in an expedited fashion. Different banks have slightly varying implementations of Supply Chain Finance (SCF) but the essential element remains the same, funding a clients buyers and sellers.
From a product perspective, Supply Chain Financing may be offered in various forms. Again, different Banks may have different terminology for their particular product offerings, but the essence remains the same.
Buyer or Distributor Financing is an attractive and fast-growing product. In addition to the traditional receivables based option, now many of the larger Banks offer direct Supply Chain loans to the Buyers. A large corporate may have hundreds or even thousands of domestic and international buyers. Funding these clients gives banks the option to increase their customer base while helping the client to manage their sales in a predictable manner.
Supplier/ Vendor Finance also takes different forms. The post-shipment approach is the most common where funding is released based on accepted invoices. This provides the Bank with an additional comfort and usually allows for collateral-free lending. Another great advantage of this is that the various options allow for differing accounting treatments- which can help a client deleverage their Balance Sheets.