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SCF allows a buyer to extend the time in which it settles its accounts payable. For the supplier, it is a sale of their receivables.
what does this mean?
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The buyer is usually a large company with a good credit rating. This means that low interest rates are charged to the supplier by the intermediary fund provider, for providing the supplier with finance, ie in the form of purchasing its invoices.
I didnt understand this as well
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buyer and supplier does transaction through intermediary ,buyers payables get extended time , supplier sells its receivable to the intermediary for a discount ? and intermediary receives payment from the buyer when payment is due , something like factoring
This means that the buyer can delay payment to its suppliers while still maintaining a good relationship with them. It is a way for the buyer to manage its cash flow effectively by using the supplier’s receivables as a form of financing.
The supplier, on the other hand, can sell its receivables to a financial institution or factor, receiving immediate payment for the invoices instead of waiting for the buyer to pay.
This provides the supplier with improved cash flow and reduces the risk of late or non-payment from the buyer.
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