Finance Types

Supplier Finance

Supplier Finance

Supplier finance or supply chain finance are collective terms normally used to describe finance arrangements where the counter-party (client) is the buyer of products and services.

It is a product used by businesses, usually larger companies, to offer their suppliers to elect to receive payment earlier than contractual terms in exchange for a discount, at the same time as allowing the buyer to preserve its cash position and optimise working capital.

Supplier finance can be provided through a number of different mechanisms but generally a financial institution (which might be a bank or non-bank) or platform will sit in between the buyer and the supplier of goods and services.

The finance provider is reliant on the buyer for repayment, hence why it is usually only used by larger well-established businesses and their suppliers.

Because the primary counter-party will often be a larger business and would generally be considered to be a lower credit-risk, smaller suppliers can often access finance (through getting paid early) at a lower cost than they might have otherwise.