Supply Chain Financing is a special kind of financial services which, coupled with specialized technical solutions, ensure the most comfortable interaction of all parties in the transaction.
Supply Chain Financing
Supply Chain Financing program has a number of advantages which make it profitable not only for the credit institution, but also for the supplier and the buyer. Banks are interested in Supply Chain Financing project because they receive commissions for trade financing as well as additional profits from providing related services. The financial organization necessarily charges its clients for opening, maintaining and servicing their accounts, as well as for conversion and foreign exchange operations. In addition, thanks to the connection of Supply Chain Finance, the bank significantly increases its customer base by building long-term credit relationships with partners.
Ways of carrying out supply chain financing
In practice, there are three ways of supply chain financing:
- through the sale of receivables of a particular buyer to the bank, voluntarily confirming this operation – reverse factoring. In this case, the seller provides a discount to the financial institution for the purchase;
- by means of financing against the pledge of inventory. The reserved goods remain in the warehouse until the buyer requests that they be made available for shipment;
- through the submission of an order to the seller, received on the basis of the buyer’s application. For this transaction the parties give preference to financing on the basis of the order.
The application of chain financing in practice
To optimize working capital and connect the buyer, suppliers and the banking institution, Supply Chain Finance offers its clients the service through a dedicated internet platform. Its functionality allows suppliers to monitor information on the status of invoices that the buyer agrees to pay. If a vendor wants to be paid before maturity, it pays a small fee and then withdraws the funds.
The introduction and use of specialized online data management platforms has helped make the use of supply chains more efficient and reliable. Reducing corporate inventory has impacted lead times by fully adjusting them to the customer’s desires. As a result, large shipments have prevailed, gradually supplanting small and irregular orders. If you want to use other tools, take a closer look at the list of brokers here https://topbrokers.com/forex-brokers-for-usa-traders and go ahead.