What is a Supplier Finance program?
Supplier finance, also known as supply chain finance, is a financing solution that helps businesses optimize their cash flow by providing early payment to suppliers.
In a supplier finance program, a financial institution works with a buyer and its suppliers to provide financing that allows suppliers to receive payment earlier than the typical payment terms.
Furthermore Supplier finance programs are often initiated by buyers who want to improve their relationships with suppliers by offering them an early payment option.
By doing so, buyers can negotiate better prices and payment terms, while suppliers can receive payment early and at a lower cost than they would typically get through traditional financing options.
Different Types of Supplier Finance:
There are different types of supplier finance programs that businesses can consider:
- Dynamic discounting: This type of program allows suppliers to receive a discount on their invoices. This is provided should they choose to be paid early. The discount is usually based on the amount of time left until the invoice due date.
- Reverse factoring: In a reverse factoring program, the financial institution pays the suppliers directly on behalf of the buyer. The buyer then pays the financial institution at a later date.
- Approved payables finance: In this program, the financial institution pays the supplier directly. The buyer repays the financial institution at a later date. The difference between this program and reverse factoring is that the buyer has the final say on which invoices are eligible for financing.
- Improved cash flow: By receiving early payment, suppliers can improve their cash flow. This can help reduce the reliance on expensive short-term financing options.
- Better relationships: Supplier finance programs can help build better relationships between buyers and suppliers. This can provide a mutually beneficial financing solution.
- Reduced supply chain risk: By providing early payment to suppliers, buyers can reduce supply chain risk. This ensures the continuity of their supply chain.
- Competitive advantage: By offering a supplier finance program, buyers can differentiate themselves from competitors and attract more suppliers.
In conclusion, supplier finance programs can be an effective way for businesses to optimize their cash flow. This can help improve relationships with suppliers.
By working with a financial institution to offer early payment options, businesses can reduce supply chain risk, improve cash flow, and gain a competitive advantage.
How to apply?
Finally applying for a Supplier Finance is very simple. Enter your details below or call 0161 8211478 to speak with one of our specialists.