- Structure
- Buyer-led payables program
- Set up by
- Buyer
- Priced on
- Buyer’s credit standing
- Settlement
- Buyer pays the bank at maturity
Reverse the direction and the price changes
In ordinary invoice finance the supplier borrows against its own name, at its own cost of funds. Supply chain finance reverses that: the buyer sets up the program, the bank looks at the buyer’s credit standing, and the supplier is paid early at a price it could never have got alone.
Nothing about the trade changes. The supplier still ships and invoices; the buyer still pays on the original due date. What changes is who waits — the bank pays the supplier now and the buyer settles at maturity, so the supplier gets cash and the buyer keeps its terms.
Because the buyer stands behind the program from the outset, there is no acceptance letter to chase for each invoice. The approval is structural: a supplier on the program, an invoice inside its limits, and the finance can proceed.
The shape of the flow
The direction is reversed. The buyer sets it up, so the supplier is paid early at the buyer’s cost of money rather than its own.
How it works on TradeOrigin
Set the program up once, then run transactions inside it. Each buyer has one program; a supplier can join the programs of many buyers.
Buyer creates the program
Name it, set the tenor and terms, and invite the suppliers and banks that will take part. Invitations are accepted on the platform.
Banks add limits and, optionally, pricing
A bank sets the limit it will fund and may fix its own pricing. If it does not, transactions on it go to bidding instead.
A transaction is raised against an invoice
Either the buyer raises it, or the supplier uploads the invoice for the buyer to raise. Charges sit with the buyer or with that particular supplier, as configured.
Priced or bid, then funded
Fixed pricing applies as agreed; otherwise banks bid and whoever bears the charges negotiates and accepts.
Buyer pays at maturity
The supplier has already been paid. At maturity the buyer settles with the funding bank.
Who it is for
Protecting the supply base
Your terms stay as they are, your suppliers stop financing you expensively, and the ones you depend on stay healthy.
Paid on someone else’s rating
Early payment priced off your buyer’s standing is usually cheaper than anything your own balance sheet can raise.
One program, many assets
Underwrite the buyer once and fund a stream of short-dated receivables across its supplier base.
What you get
Cheaper money for the supplier
Pricing follows the buyer’s credit, not the supplier’s.
Terms preserved for the buyer
Working capital is not spent to keep suppliers liquid.
No acceptance letter
The buyer’s program is the approval, so there is no per-invoice acceptance to collect.
Fixed pricing or bidding
Where a bank has agreed a rate it simply applies; where it has not, the transaction goes out to bid.
What the bank will ask for
Uploaded once, against the deal, and visible only to the counterparties on it.
Questions
Can a supplier be on more than one buyer’s program?
Yes. Each buyer runs a single program, and a supplier can participate in many — each with its own limits, pricing and charge arrangement.
Who pays the finance charges?
Whichever side the program says, and that is set per supplier rather than for the whole program. Whoever bears the charges is the side that negotiates when a transaction goes to bidding.
Does this change how our payables are reported?
It can, and it is worth settling early with your auditors. Payables finance is disclosed as a supplier finance arrangement under current reporting requirements, and stretching payment terms well beyond your ordinary trade terms is what invites a debate about whether the balance is still a trade payable. Programs that leave the commercial terms alone and finance them are the straightforward case.
Related
Supply Chain Finance Program
The standing facility behind SCF: one program per buyer, its suppliers, its banks, their limits and charge terms.
ProductReceivable Finance
Discount approved invoices early, against a buyer acceptance letter and bill of exchange.
ProductForfaiting
Sell medium-term export receivables without recourse and take the risk off your balance sheet entirely.