Buyer-Guaranteed Supply Chain Finance
What is Supply Chain Finance?
Supply Chain Finance (SCF) is a credit facility designed to facilitate trade financing between purchasing firms and their suppliers.
This financial instrument enables suppliers of goods or services to effectively monetize receivables generated from sales. For buyers, SCF streamlines payment management across a vast network of suppliers without imposing operational burdens, while providing flexible payment maturities, ensuring the continuity of the supply chain.
The Buyer-Credit Limit Supply Chain Finance System, operating under a formal agreement between the Bank and the buyer, facilitates payments to the buyer’s suppliers at a predetermined discount rate prior to the invoice maturity date, using a credit limit allocated to the buyer. In this system, the buyer’s receivables are utilized as collateral, and the buyer is responsible for repaying the Bank upon the maturity of the discounted period.
The process steps of the Buyer-Credit Limit Supply Chain Finance System include:
Strategic Benefits of Supply Chain Finance for Buyers
- Financing under favorable conditions ensures continuous procurement and consistent product quality.
- The "supplier-friendly" nature of the system fosters stronger loyalty and bolsters the overall strength of the supply chain.
- Eliminates the operational burden.
- Prevents potential disruptions in the payment cycles of strategic suppliers.
- Offers flexible payment terms.
Strategic Benefits of Supply Chain Finance for Suppliers
- Enables the early collection of receivables under competitive financial conditions.
- Facilitates effective management of cash flows.
- Simplifies working capital management without incurring further credit risk.
- Establishes a more robust relationship with the buyer.
- By leveraging early and guaranteed collection, the supplier gains a competitive edge, particularly in cash-based purchases.
Who Can Benefit from Supply Chain Finance?
Buyer firms that are members of any of the Supply Chain Finance Platforms integrated with our Bank and possess an established credit limit specifically for the Supply Chain Finance product are eligible to avail themselves of its benefits.