- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- May 7, 2021 at 6:57 am #619914
Sir, could you please explain supply chain finance and reverse factoring?
May 7, 2021 at 8:36 am #619944They are two names given to the same thing.
What happens is the the supplier sends an invoice to the buyer. Obviously the buyer would prefer to delay payment rather than pay immediately, but the seller would obviously prefer to get paid immediately.
So with supply chain finance, the supplier sends the invoice to the buyer and the buyer approves it. They then use an intermediary (e.g. a bank) who pays the seller immediately. The buyer pays the bank but they pay them later. (So it like the bank lending the money)
The bank charges for the service, but it is cheaper than raising finance in other ways.The supplier benefits by getting the money immediately. The buyer benefits by not having to pay immediately. Also, the relationship between the buyer and seller is improved.
May 7, 2021 at 11:01 pm #619992Okay, thank you 🙂
May 8, 2021 at 8:47 am #620017You are welcome 🙂
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