top of page
officebuildings.jpg

Morewood Funding Blog

  • Writer's pictureHoward Abrahams

Supply Chain Finance: Enhanced Cash Management for Buyers and Suppliers

Updated: Jul 18, 2023



Supply chain financing (SCF) is an elegant solution that bridges the gap between a business’s (buyer) preference to extend their payables terms and suppliers that would like to shorten the terms. By engaging an SCF Lender, the buyer, and the supplier can accomplish their seemingly opposite cash management goals.


A typical SCF transaction works as follows: a buyer purchases goods from a supplier on standard credit terms of 30 days (for example). If a supplier wants to get paid sooner or the buyer wants to pay slower than the standard terms, the buyer would engage an SCF lender to pay the supplier. The SCF will negotiate a discount with the seller and immediately pay that discount to the seller. Since the seller has been paid, the buyer now benefits from the extended terms previously negotiated with the SCF lender. At the end of the extended terms, the buyer will pay the SCF lender the full amount of the invoice. The result is that the buyer receives longer terms, the seller receives immediate payment and the SCF lender profits from the spread between the discounted amount and the full amount the buyer pays.


Benefits of supply chain financing:

  • Will reduce your dependency on your bank (or other) financing lines,

  • It does not require a personal guarantee,

  • Smooths out the Buyer’s cash flow,

  • This means that the buyers credit worthiness not an issue for the seller because the seller relies on SCF to pay the invoice,

  • Gives the seller immediate payment,

  • Provides the seller with enhanced certainty and predictability of payment,

  • Builds stronger vendor relations/supply chain resiliency.


Until the early 2000s, supply chain financing was only available to large corporations. However, with developments in technology and finance, SCF has become a viable option for middle market and smaller businesses. Typical minimum financing amounts are $1mm per year and more.


If you are a business looking to extend payment terms or a supplier looking to shorten payment terms, Morewood Funding is equipped to advise on a supply chain financing relationship.


Morewood Funding arranges non-dilutive capital by leveraging accounts receivable, inventory, equipment, and other assets. Our independent approach enables us to work with multiple lenders, resulting in an optimal funding rate and structure.


Please call or email to discuss any funding needs you may have: 917 561 7074 or Howard@MorewoodFunding.com.

18 views0 comments

Recent Posts

See All

Comentários


bottom of page