{"id":2812,"date":"2020-03-23T17:02:31","date_gmt":"2020-03-23T17:02:31","guid":{"rendered":"http:\/\/localhost\/2020\/swoopMW20\/?post_type=knowledge-hub&#038;p=2812"},"modified":"2024-03-12T17:12:29","modified_gmt":"2024-03-12T17:12:29","slug":"supplier-finance","status":"publish","type":"knowledge-hub","link":"https:\/\/swoopfunding.com\/za\/knowledge-hub\/supplier-finance\/","title":{"rendered":"Supplier finance"},"content":{"rendered":"\n <div class=\"faq-accordion faq-accordion1184\">\n <div class=\"card\">\n <div class=\"card-header\" id=\"heading01184\">\n <h5 class=\"mb-0\">\n <a class=\"btn btn-link\" data-toggle=\"collapse\" data-target=\"#collapse01184\" aria-expanded=\"true\" aria-controls=\"collapse0\">\n What is supplier finance? <\/a>\n <\/h5>\n <\/div>\n\n <div id=\"collapse01184\" class=\"collapse show\" aria-labelledby=\"heading0\" data-parent=\".faq-accordion1184\">\n <div class=\"card-body\">\n <p><em data-rich-text-format-boundary=\"true\">Supplier finance (also known as\u00a0\u2018<a href=\"https:\/\/swoopfunding.com\/za\/business-loans\/supply-chain-finance\/\">supply chain finance<\/a>\u2019\u00a0or \u2018reverse factoring\u2019) is a type of\u00a0<\/em><a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/business-cash-advance\/\"><em>business cash advance<\/em><\/a><em>, similar to\u00a0<\/em><a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/invoice-finance\/\"><em>invoice finance<\/em><\/a><em>. If your business is the seller (or supplier) then you can benefit from the higher credit scores of the buyers in your supply chain. Your buyers can also lengthen their payment terms without impacting your cash flow.<\/em><\/p>\n <\/div>\n <\/div>\n <\/div>\n <div class=\"card\">\n <div class=\"card-header\" id=\"heading11184\">\n <h5 class=\"mb-0\">\n <a class=\"btn btn-link\" data-toggle=\"collapse\" data-target=\"#collapse11184\" aria-expanded=\"true\" aria-controls=\"collapse1\">\n Why choose supplier finance? <\/a>\n <\/h5>\n <\/div>\n\n <div id=\"collapse11184\" class=\"collapse \" aria-labelledby=\"heading1\" data-parent=\".faq-accordion1184\">\n <div class=\"card-body\">\n <p>If you need cash (working capital) to increase sales or manage your seasonal cycle, but are hampered by your credit score, supplier<em>\u00a0<\/em>finance (supply chain finance) could help you. From the lender\u2019s perspective, if your business has a credit-worthy buyer (a large, multinational, say) then the buyer is likely to honour your invoices and it can access capital (borrow from a lender) at a lower cost.<br data-rich-text-line-break=\"true\" \/><br data-rich-text-line-break=\"true\" \/>Supplier finance works like this:<\/p>\n<ul>\n<li>You (the supplier or seller) issue an invoice to a buyer (they are the ones with the high credit score in this example)<\/li>\n<li>Your buyer confirms to the lender that you have approved the invoice for payment<\/li>\n<li>The lender advances you 100% of the value of the invoice (minus a small fee)<\/li>\n<li>When payment is due, your buyer pays the lender directly<\/li>\n<\/ul>\n <\/div>\n <\/div>\n <\/div>\n <div class=\"card\">\n <div class=\"card-header\" id=\"heading21184\">\n <h5 class=\"mb-0\">\n <a class=\"btn btn-link\" data-toggle=\"collapse\" data-target=\"#collapse21184\" aria-expanded=\"true\" aria-controls=\"collapse2\">\n Is it suitable for an SME? <\/a>\n <\/h5>\n <\/div>\n\n <div id=\"collapse21184\" class=\"collapse \" aria-labelledby=\"heading2\" data-parent=\".faq-accordion1184\">\n <div class=\"card-body\">\n <p>It\u2019s helpful to see supplier finance (or supply chain finance) as a three-way collaboration \u2013 the lender helps both the buyer and the supplier, and all three parties have an arrangement together. This is why supplier finance is different to\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/invoice-finance\/\">invoice finance<\/a>, even if it seems similar from the supplier\u2019s point of view. It also differs from\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/trade-finance\/\">trade finance<\/a>. All of these types of funding help businesses manage cash flow but there are important differences between them.<br data-rich-text-line-break=\"true\" \/><br data-rich-text-line-break=\"true\" \/>Supply chain finance is not a\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/business-loans\/\">loan<\/a>. There is no financial debt. Rather, it\u2019s an extension of the buyer\u2019s accounts payable. For the supplier (i.e. your business), it represents a true sale of receivables. There is no lending on either side of the buyer\/supplier equation, which means there is no impact to balance sheets.<\/p>\n <\/div>\n <\/div>\n <\/div>\n <div class=\"card\">\n <div class=\"card-header\" id=\"heading31184\">\n <h5 class=\"mb-0\">\n <a class=\"btn btn-link\" data-toggle=\"collapse\" data-target=\"#collapse31184\" aria-expanded=\"true\" aria-controls=\"collapse3\">\n Pros and cons of supplier finance? <\/a>\n <\/h5>\n <\/div>\n\n <div id=\"collapse31184\" class=\"collapse \" aria-labelledby=\"heading3\" data-parent=\".faq-accordion1184\">\n <div class=\"card-body\">\n <p>It\u2019s advantageous all round. Your cash flow\u00a0is stabilised because you (the supplier) get paid within a few days, rather than waiting for the \u2018payment due\u2019 date (which could be as long as 90 or 120 days). And the buyer benefits too, because they have effectively extended their payment terms\u00a0<em>without<\/em>\u00a0negatively impacting you \u2013 and without touching their working capital. In other words, the lender takes on any payment delay.<br data-rich-text-line-break=\"true\" \/><br data-rich-text-line-break=\"true\" \/>Supplier finance comes with a limitation: your supplier financing company can buy products on your behalf\u00a0only\u00a0up to the amount that your business can be credit insured. So you might not be able to use supplier finance for very large orders. You might want to consider purchase order finance, which is also \u2018pre-delivery\u2019.<br data-rich-text-line-break=\"true\" \/><br data-rich-text-line-break=\"true\" \/>That said, supplier finance has two main advantages over PO finance:<\/p>\n<ul>\n<li>You can use it if you are manufacturer (unlike <a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/purchase-order-finance-po-finance\/\">PO finance<\/a>)<\/li>\n<li>You can use it alongside existing financing (e.g., a <a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/line-of-credit-non-revolving\/\">line of credit<\/a>) because it does not encumber assets (by contrast, a PO finance transaction is secured by your accounts receivable so might not work if you already have a lender in place (unless they subordinate their position)<\/li>\n<\/ul>\n <\/div>\n <\/div>\n <\/div>\n <div class=\"card\">\n <div class=\"card-header\" id=\"heading41184\">\n <h5 class=\"mb-0\">\n <a class=\"btn btn-link\" data-toggle=\"collapse\" data-target=\"#collapse41184\" aria-expanded=\"true\" aria-controls=\"collapse4\">\n Have you also considered? <\/a>\n <\/h5>\n <\/div>\n\n <div id=\"collapse41184\" class=\"collapse \" aria-labelledby=\"heading4\" data-parent=\".faq-accordion1184\">\n <div class=\"card-body\">\n <p><a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/purchase-order-finance-po-finance\/\" data-rich-text-format-boundary=\"true\">PO finance<\/a> &#8211; Purchase order finance (\u2018PO Finance\u2019) is funding advanced to a supplier (from a finance provider) secured against a confirmed purchase order.\u00a0You can use purchase order finance if you are a product distributor or reseller and need finance to fulfil a specific order. You can\u2019t use PO finance if you directly manufacture products or if you just want to build inventory.<br data-rich-text-line-break=\"true\" \/>\u00a0<br data-rich-text-line-break=\"true\" \/><a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/business-loans\/\">Loans<\/a><strong>\u00a0<\/strong>from\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/trade-finance\/\">trade finance lenders<\/a>\u00a0(i.e.\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/trade-finance-loan\/\">trade finance loans<\/a>).<br data-rich-text-line-break=\"true\" \/>\u00a0<br data-rich-text-line-break=\"true\" \/><a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/revolving-credit-line-facility\/\">Revolving credit<\/a> &#8211; A revolving credit line (facility) is a rolling agreement between you (the business) and a lender\u00a0\u2013\u00a0in contrast to a fixed\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/business-loans\/\">business loan<\/a>. You can use it on an as-needed basis and pay it off when it\u2019s convenient. You have a credit limit, in the same way you do with a\u00a0<a href=\"https:\/\/swoopfunding.com\/za\/knowledge-hub\/business-credit-card\/\">business credit card<\/a>\u00a0or bank overdraft.<\/p>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \n <script type=\"application\/ld+json\">\n    {\n        \"@context\": \"https:\/\/schema.org\",\n        \"@type\": \"FAQPage\",\n        \"mainEntity\": [\n                                {\n                \"@type\": \"Question\",\n                \"name\": \"What is supplier finance?\",\n                \"acceptedAnswer\": {\n                    \"@type\": \"Answer\",\n                    \"text\": \"Supplier finance (also known as\u00a0\u2018supply chain finance\u2019\u00a0or \u2018reverse factoring\u2019) is a type of\u00a0business cash advance, similar to\u00a0invoice finance. If your business is the seller (or supplier) then you can benefit from the higher credit scores of the buyers in your supply chain. Your buyers can also lengthen their payment terms without impacting your cash flow.\"\n                }\n            },                                {\n                \"@type\": \"Question\",\n                \"name\": \"Why choose supplier finance?\",\n                \"acceptedAnswer\": {\n                    \"@type\": \"Answer\",\n                    \"text\": \"If you need cash (working capital) to increase sales or manage your seasonal cycle, but are hampered by your credit score, supplier\u00a0finance (supply chain finance) could help you. From the lender\u2019s perspective, if your business has a credit-worthy buyer (a large, multinational, say) then the buyer is likely to honour your invoices and it can access capital (borrow from a lender) at a lower cost.Supplier finance works like this:  You (the supplier or seller) issue an invoice to a buyer (they are the ones with the high credit score in this example) Your buyer confirms to the lender that you have approved the invoice for payment The lender advances you 100% of the value of the invoice (minus a small fee) When payment is due, your buyer pays the lender directly \"\n                }\n            },                                {\n                \"@type\": \"Question\",\n                \"name\": \"Is it suitable for an SME?\",\n                \"acceptedAnswer\": {\n                    \"@type\": \"Answer\",\n                    \"text\": \"It\u2019s helpful to see supplier finance (or supply chain finance) as a three-way collaboration \u2013 the lender helps both the buyer and the supplier, and all three parties have an arrangement together. This is why supplier finance is different to\u00a0invoice finance, even if it seems similar from the supplier\u2019s point of view. It also differs from\u00a0trade finance. All of these types of funding help businesses manage cash flow but there are important differences between them.Supply chain finance is not a\u00a0loan. There is no financial debt. Rather, it\u2019s an extension of the buyer\u2019s accounts payable. For the supplier (i.e. your business), it represents a true sale of receivables. There is no lending on either side of the buyer\/supplier equation, which means there is no impact to balance sheets.\"\n                }\n            },                                {\n                \"@type\": \"Question\",\n                \"name\": \"Pros and cons of supplier finance?\",\n                \"acceptedAnswer\": {\n                    \"@type\": \"Answer\",\n                    \"text\": \"It\u2019s advantageous all round. Your cash flow\u00a0is stabilised because you (the supplier) get paid within a few days, rather than waiting for the \u2018payment due\u2019 date (which could be as long as 90 or 120 days). And the buyer benefits too, because they have effectively extended their payment terms\u00a0without\u00a0negatively impacting you \u2013 and without touching their working capital. In other words, the lender takes on any payment delay.Supplier finance comes with a limitation: your supplier financing company can buy products on your behalf\u00a0only\u00a0up to the amount that your business can be credit insured. So you might not be able to use supplier finance for very large orders. You might want to consider purchase order finance, which is also \u2018pre-delivery\u2019.That said, supplier finance has two main advantages over PO finance:  You can use it if you are manufacturer (unlike PO finance) You can use it alongside existing financing (e.g., a line of credit) because it does not encumber assets (by contrast, a PO finance transaction is secured by your accounts receivable so might not work if you already have a lender in place (unless they subordinate their position) \"\n                }\n            },                                {\n                \"@type\": \"Question\",\n                \"name\": \"Have you also considered?\",\n                \"acceptedAnswer\": {\n                    \"@type\": \"Answer\",\n                    \"text\": \"PO finance &#8211; Purchase order finance (\u2018PO Finance\u2019) is funding advanced to a supplier (from a finance provider) secured against a confirmed purchase order.\u00a0You can use purchase order finance if you are a product distributor or reseller and need finance to fulfil a specific order. You can\u2019t use PO finance if you directly manufacture products or if you just want to build inventory.\u00a0Loans\u00a0from\u00a0trade finance lenders\u00a0(i.e.\u00a0trade finance loans).\u00a0Revolving credit &#8211; A revolving credit line (facility) is a rolling agreement between you (the business) and a lender\u00a0\u2013\u00a0in contrast to a fixed\u00a0business loan. You can use it on an as-needed basis and pay it off when it\u2019s convenient. You have a credit limit, in the same way you do with a\u00a0business credit card\u00a0or bank overdraft.\"\n                }\n            }          ]\n    }\n    <\/script>\n \n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"parent":0,"menu_order":51,"template":"","segment":[296],"acf":[],"featured_image_urls":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable":"<p>What is supplier finance? Supplier finance (also known as\u00a0\u2018supply chain finance\u2019\u00a0or \u2018reverse factoring\u2019) is a type of\u00a0business cash advance, similar to\u00a0invoice finance. If your business is the seller (or supplier) then you can benefit from the higher credit scores of the buyers in your supply chain. Your buyers can also lengthen their payment terms without impacting your cash flow. Why choose supplier finance? If you need cash (working capital) to increase sales or manage your seasonal cycle, but are hampered by your credit score, supplier\u00a0finance (supply chain finance) could help you. From the lender\u2019s perspective, if your business has a&hellip;<\/p>\n","category_list":"","author_info":{"name":"","url":""},"comments_num":"0 comments","featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"<p>What is supplier finance? Supplier finance (also known as\u00a0\u2018supply chain finance\u2019\u00a0or \u2018reverse factoring\u2019) is a type of\u00a0business cash advance, similar to\u00a0invoice finance. If your business is the seller (or supplier) then you can benefit from the higher credit scores of the buyers in your supply chain. Your buyers can also lengthen their payment terms without impacting your cash flow. Why choose supplier finance? If you need cash (working capital) to increase sales or manage your seasonal cycle, but are hampered by your credit score, supplier\u00a0finance (supply chain finance) could help you. From the lender\u2019s perspective, if your business has a&hellip;<\/p>\n","category_list_v2":"","author_info_v2":{"name":"","url":""},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/knowledge-hub\/2812"}],"collection":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/knowledge-hub"}],"about":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/types\/knowledge-hub"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media?parent=2812"}],"wp:term":[{"taxonomy":"segment","embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/segment?post=2812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}