Supply Chain Finance

Supply chain finance (SCF), also called reverse factoring, is a buyer-led financing arrangement. A large buyer works with a finance provider to offer its suppliers the option to receive early payment on their invoices (at a small discount) rather than waiting for the buyer's standard payment terms.

For the buyer, SCF extends cash flow without lengthening actual payment terms (the finance provider pays the supplier early; the buyer repays the finance provider on the original due date). For the supplier, SCF provides predictable, fast access to cash at a cost based on the buyer's credit rating (typically lower than the supplier's own borrowing cost).

Supply chain finance is most common in large buyer-SME supplier relationships, particularly in manufacturing, retail, and construction. Spark Finance can structure supply chain finance facilities for both buyers seeking to offer extended terms and suppliers seeking to access early payment.

Related terms