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Hi,
help me understand this statement from BPP, “SCF allows SME to raise finance at a lower interest rate than would normally be available”. And if possible, explain the concept of SCF in this respect.
Thanks.I assume that you are already happy with the idea that if a supplier want to receive cash from a customer sooner earlier than the normal period of credit that is offered, then they might offer a discount for early payment, This gives them finance earlier but there is obviously the cost of the discount.
Supply chain finance is the same idea except that instead of the customer having to pay earlier than they want to, a financial institution make early payment to the supplier and then gives credit to the customer who pays later. Obviously the financial institution charges interest but this is likely to be at a lower interest rate than (for instance) simply taking a loan.
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