Supply Chain Finance (SCF)
Supply Chain Finance (SCF) is a set of financing techniques that optimise working capital across a buyer–supplier relationship — typically letting suppliers receive early payment on their approved invoices while the buyer keeps or extends its payment terms. The most common form, reverse factoring / approved-payables finance, has a financier pay the supplier early at a low cost based on the buyer's (usually stronger) credit rating, with the buyer later paying the financier on the due date.
SCF is a win-win-win: the supplier gains faster, cheaper cash and less risk; the buyer improves its cash flow and can strengthen its supply base; and the financier earns a margin on low-risk receivables. It differs from traditional factoring (supplier-initiated, based on the supplier's own credit) and is increasingly delivered through digital platforms integrated with procurement and ERP systems. By injecting liquidity where it is scarce and cheap where credit is strong, supply chain finance strengthens supply-chain resilience — a benefit underscored when cash-strapped suppliers struggle during disruptions. It sits at the intersection of procurement, finance and technology.
Supply chain finance solves a real squeeze — suppliers need cash sooner, buyers want to pay later — by using the buyer's strong credit to fund suppliers cheaply and early. It strengthens the supply base and resilience, especially when suppliers are cash-strapped in a disruption, and its ERP/procurement integration makes it a natural extension of digital procurement.
How does reverse factoring work?
A financier pays the supplier early on buyer-approved invoices at a low rate based on the buyer's credit, and the buyer pays the financier on the due date.
How is SCF different from factoring?
Factoring is supplier-initiated and based on the supplier's credit; supply chain finance is buyer-led and leverages the buyer's stronger credit rating.