Benefits to Corporates and their Suppliers
Supply Chain Finance is attractive to Corporates primarily because it enables them to maintain their own working capital for longer periods without damaging their supply chain by withdrawing liquidity. Seller-led Working Capital Finance programmes can often be represented on the balance sheet as Accounts Payable obligations (because the arrangement is cash neutral for the Buyer), as opposed to other forms of financing which may impact leverage ratios and incur financing costs for the Buyer.
Suppliers will often have access to a variety of ways to fund their business, but these may be less transparent or only available on punitive terms. It may also be the case that the Supplier is smaller or perceived to be a greater credit risk than the Buyer, and so a Working Capital Finance programme enables a Supplier to access funding whilst benefiting from pricing closer to that which may be offered to a larger, better rated entity.