When the payment date comes for the small business a few weeks later, the business fulfills the payment and the money goes to the funder or supplier, depending on which holds the account at that time.Įditor’s note: Need a factoring service for your business? Fill out the below questionnaire to have our vendor partners contact you with free information. In this scenario, the supplier can receive advanced payment on the outstanding invoices from a third-party funder.
It gives small businesses the opportunity to extend payment dates to suppliers without any impact to their credit scores and without the suppliers losing money. Supply chain financing, while a little complex, is a useful small business tool. Further, 41% of respondents that are not participating supply chain financing programs said they were considering it.Īs someone who has spent the past decade working directly with small and midsize businesses, providing them with working capital through accounts receivable financing, I have to ask myself, “Will supply chain finance replace invoice factoring?” What is supply chain financing? The 2018/2019 SCF Barometer from PricewaterhouseCoopers found that 55% of surveyed companies are participating in supply chain financing programs. Some of these corporations use their own cash to fund the programs, while others have partnered with banks or hedge funds to fund early payments to suppliers. Most SCF programs are offered by large corporations with thousands of suppliers, such as Amazon, Walmart, Coca-Cola, Warner Bros., Nordstrom and Bell. Should you take part in a supply chain finance program?Įvery day I hear about another company offering a supply chain finance (SCF) program or early-pay option for their suppliers.
#Invoice factoring explanation professional
If you’re confused about your overall options, work with a finance professional to better understand what’s best for your business’s specific situation. Invoice financing, while somewhat different, takes a similar structure in cash advancements. Before you pursue this path, make sure you research other financing options and understand what’s best for your business. Supply chain finance programs can be a way to get cash quickly.
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