Supply Chain Finance

Supply chain financing encompasses various financial solutions designed to optimize the flow of capital within supply chains. It typically covers the financing of open account transactions from development to distribution. By providing accessible financing throughout the physical supply chain, all parties involved in a trade transaction can benefit significantly.

• Provides liquidity and working capital to suppliers, manufacturers, and distributors.

• Ensures prompt payment to suppliers and extended payment terms for buyers.

• Improves overall efficiency and financial health of the supply chain.

Receivables Discounting

Receivables discounting, also known as receivables finance, receivables purchase, or invoice discounting, involves the sale of outstanding invoices to a finance provider at a discount. Sellers of goods and services can sell individual or multiple receivables to receive immediate cash. This improves cash flow and liquidity for the seller without waiting for the payment terms to mature.

• Finance provider collects payment from buyers at the invoice's due date.

• Useful for maintaining smooth operations or investing in growth opportunities.

Forfaiting

Forfaiting is the non-recourse purchase of future payment obligations from an exporter, typically represented by financial instruments like promissory notes or bills of exchange. The term "forfait" means to relinquish a right. In this context, the exporter gives up the right to collect payment on the due date for an immediate lump-sum payment from the forfaiter, who assumes all risks and debt collection responsibilities.

• Financial instruments are usually negotiable or transferable.

• Commonly used for medium to long-term export contracts.

Factoring

Factoring involves a seller of goods and services selling their accounts receivable (invoices) to a finance provider (the factor) at a discount. The factor then takes on the responsibility of managing the debtor portfolio and collecting payments from the buyers.

• Factoring can be with or without recourse; non-recourse shifts credit risk to the factor.

• Provides immediate cash flow and advances up to 90% of the invoice value.

• Two-factor international factoring involves domestic and local factors to facilitate cross-border transactions.

Payables Finance

Payables finance, also known as reverse factoring or supplier finance, is a buyer-led program that allows suppliers in the buyer's supply chain to access early payment on their receivables. Under this arrangement, the supplier sells its receivables to a finance provider at a discount, based on the buyer's creditworthiness.

• Suppliers receive the discounted value before the due date, improving cash flow.

• Buyers benefit from extended payment terms without straining supplier relationships.

• Financing cost aligned with buyer's credit risk, often resulting in favorable terms for suppliers.

Loan or Advance Against Receivables

This type of financing involves a finance provider offering a loan or advance to a party based on the expectation of repayment from current or future trade receivables. Also known as receivables lending or trade receivable loans, this financing solution helps businesses access working capital by leveraging their outstanding invoices.

• Finance provider assesses the creditworthiness of receivables and offers a loan amount accordingly.

• Ensures businesses have funds to manage operations and growth while awaiting receivables payment.

Distributor Finance

Distributor finance provides financial support to distributors of large manufacturers, helping them cover the cost of holding inventory until they receive payment from sales to retailers or end customers.

• Known as buyer finance, dealer finance, or channel finance.

• Bridges liquidity gap for distributors, allowing them to purchase and hold inventory.

• Enhances distributor's ability to maintain stock levels and ensures smooth flow of goods.

Loan or Advance Against Inventory

This financing solution involves providing funds to a buyer or seller for holding or warehousing goods. The finance provider usually takes a security interest in the inventory or an assignment of rights and may exercise a measure of control over the goods.

• Known as inventory finance or warehouse finance.

• Allows businesses to manage inventory without depleting cash reserves.

• Useful for seasonal fluctuations, large inventory purchases, or storing goods before sale.

• Financing against warehouse receipts is a common form, using receipts as collateral.

Pre-shipment Finance

Pre-shipment finance is a loan provided to sellers of goods and services to fund the sourcing, manufacturing, or conversion of raw materials or semi-finished goods into finished products. This type of financing helps sellers meet production and delivery commitments without facing cash flow constraints.

• Known as purchase order finance or packing credit finance.

• Loan repaid from sale proceeds once goods are delivered to buyers.

• Ensures sellers have necessary funds to fulfill orders, maintain production schedules, and meet demand.