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An overview of supply chain finance and FAQs

What is supply chain finance?

Supply chain finance is defined by the Global Supply Chain Finance Forum, which represents global industry associations and has developed standard terms and definitions, as "the use of financing and risk mitigation practices and techniques to optimise the management of the working capital and liquidity invested in supply chain processes and transactions. Supply chain finance is typically applied to open account trade and is triggered by supply chain events. Visibility of underlying trade flows by the finance provider(s) is a necessary component of such financing arrangements which can be enabled by a technology platform."

Investopedia defines supply chain finance as "a set of technology-based business and financing processes that link the various parties in a transaction—buyer, seller, and financing institution— to lower financing costs and improve business efficiency. Supply chain finance provides short-term credit that optimises working capital for both the buyer and the seller. Supply chain finance utilises business solutions that optimise working capital and provide liquidity to businesses. Suppliers sell their invoices or receivables at a discount to banks or other financial service providers, often called factors. In return, the suppliers get faster access to the money they are owed, enabling them to use it for working capital, while buyers generally get more time to pay."

What is flexible funding?

Flexible funding means using multiple, pooled funding sources. In supply chain finance, this can include external, third-party funding providers or self-funded options. A company can use excess cash (such as treasury funds) to self-fund its supply chain finance programme, either entirely or partially.

What is dynamic discounting?

Dynamic discounting refers to corporate buyers financing their suppliers with early payment terms (rather than financing their suppliers via third-party funders). Corporates and their suppliers can access early payment discounts on an invoice-by-invoice basis. Corporate buyers and their suppliers can view invoices using a tech-based platform and select approved invoices for early payment.

What is purchase order (PO) financing?

Purchase order financing is funding that is advanced to a supplier and secured against a confirmed purchase order.

Who offers supply chain finance, dynamic discounting and purchase order financing?

Supply chain finance programmes, dynamic discounting and purchase order financing are offered by a range of providers from financial institutions to fintech companies.

How is Crossflow different from other providers?

Crossflow is a working capital marketplace. Our platform connects corporates and their suppliers to funders. Our global network of funders ranges from global banks and alternative investment funds to family offices and high-net-worth investors.

We offer supply chain finance, dynamic discounting and purchase order financing. Our advanced technology helps corporates and their suppliers achieve full process automation with high-grade data security and simple, seamless integration with their operational systems. Our mission is to help corporates connect with funders to release millions in working capital, automate payments, strengthen supply chain relationships and grow sustainably.

Where do I begin if I'm looking to implement a supply chain finance programme?

It is important to choose a flexible supply chain finance programme that works for your company and meets your specific requirements.

A one-size-fits-all approach never works since each enterprise has its own challenges and goals. Your supply chain finance programme provider needs to provide a tailored offering aligned with your core objectives with measurable outcomes. This should start with a comprehensive working capital consultation and analysis of your current data and pain points and recommendations based on the data, your key objectives and your business challenges.

Crossflow combines a personalised, hands-on approach led by our team of experts with the efficiency of an intelligent platform powered by technology. Our team will guide you through a detailed analysis of your current working capital position and recommendations on how to implement a tailored supply chain finance programme to meet your objectives. We guide enterprises through every step of the process from initial meeting to implementation, supplier onboarding and roll-out.

Our free guide to selecting a supply chain finance programme gives you five key considerations.

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Contact us for a free working capital consultation with our team of experts.

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Other resources

Our Crossflow blog looks at supply chain and working capital challenges, opportunities and trends.