Keeping goods moving along the chain means major costs
Supply Chain Finance can help
Working capital is critical to every business. A long supply chain - and especially an international supply chain - ties up a great deal of working capital. Having to pay for supplies that may not reach you for weeks or months can mean a major cost, and the costs escalate every time gets higher when economic, political or environmental problems mean delays.
Supply Chain Finance can provide the solution.
Table of Contents
What is Supply Chain Finance?
A supply chain is a succession of businesses that depend on each other. Your business can’t function without its suppliers and your customers can’t function without you.
Cashflow problems occur when your supply chain doesn’t function properly. If you’re supplying a business that pays you in ninety days but you have to pay your supplier in thirty days, there are sixty days where you’re in a deficit. If this is a big-ticket contract you can run into big trouble. Supply chain finance, or reverse factoring, is a way to increase your access to working capital and reduce your supply chain risk. It can let you cut costs, increase supplier payment terms and get paid early.
Struggling to balance cashflow due to supply chain payment terms?
Speak to our team to find out if supply chain finance could benefit your business
It provides an external source of funding that optimises cash flow by allowing buyers to extend supplier payment terms, freeing up cash that would otherwise be trapped inside the supply chain.
Buyers can use increased cash flow to drive additional growth. Suppliers have the option to get paid early, typically as soon as an invoice has been approved by a buyer.
An invoice discount arrangement could provide an answer. Supply chain finance can provide a better one.
How supply chain finance works
Supply chain finance pays you 100% of your invoices as cash, less a small discount. This can be provided as quickly as 24 hours after your customer has approved your invoice. It’s as if your customer has paid you cash, and there is no risk of a comeback from the lender.
If you’ve previously used invoice discounting, you know lenders will typically provide between 75% and 85% of your unpaid invoices - but if your customer does not pay, they will demand the money back from you. The money is simply an advance against an unpaid invoice, a debt that your business remains responsible for.
The disadvantages don't stop there. The charges that apply with invoice discounting are high. Set-up costs, annual charges and invoice costs can add up to a major drain on your profitability.
When you use supply chain funding you have just one simple fee. This is a small discount on your payment, and the rest of the money is yours - exactly as if you had been paid by your customer.
Modern supply chain finance helps ensure that businesses pay on time and get paid on time. It's fairer for everybody - and its simple to use:
Supplier submits an invoice to the buyer.
The buyer approves the invoice.
Supplier selects invoices for early payment.
Funder receives and processes requests and provides payment to the supplier. A transfer is made electronically.
Once the invoice has matured, the buyer will pay the funder.
To learn more, speak to our supply chain finance experts today!
What are the benefits of supply chain finance?
Supply chain finance is beneficial for both buyers and suppliers as it helps both parties stabilise their cash flow.
Suppliers will receive similar benefits to invoice financing, and they will get paid within a few days rather than waiting for extended payment terms.
The supply chain is directly based on the buyer's credit rating; this means the costs will be lowered.
Buyers can extend their payment terms, ie. they can delay paying suppliers for longer than usual without directly putting pressure on their suppliers.
It's the lender whose working capital is affected - this leaves both buyers' and suppliers' working capital free to use for other business purposes.
If you're looking for financing to hit your cash flow objectives, speak to Rangewell today! We have a range of financial solutions to suit your needs. We can tailor payment options to suit your requirements.
Take on more work
Many SME owners turn down big projects because of the uncertainty involved in funding. Supply Chain Funding eliminates the risk of not getting paid.
Having funds available means that you can afford to take on new contracts and build your business.
Working across global markets can help you make the most of your business, but it means costs and risks. Supply Chain Funding eliminates the risks, and lets you take advantage of a global supply chain - and markets.
If you'd like to learn more about development finance institutions, private capital, capital strategy and financing options to suit your needs - Speak to Rangewell today!
Whatever sector you are in, we have experts to support you
Improve cashflow and make your supply chain less risky with our help
We know that there are many funding providers - but that not all of them will be able to offer you the most competitive deal.
Our finance experts can help you find the right kind of finance arrangement, the lenders who work in your sector and the most competitive deals. By searching across the entire market, we'll find the plans that are right for your business needs.
Get in touch today to learn more about a supply chain finance program to suit your needs.
REAL EXAMPLES OF WHAT WE CAN DO
Find a lender to provide Supply Chain Finance for a luxury furniture retailer
Help set up an arrangement for a clothing business with international suppliers to support a multi-million-pound turnover
Set up an arrangement for an engineering business that would allow it to supply a motor manufacturer with a long payment time
Find a small importing business an arrangement which would let it expand its supplier base
Find a lender for a company with aggressive growth plans which would involve quadrupling in size in under a year
Discover our range of finances
Every type of finance for every type of business
Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.
Helping you build your profits
Avoid the danger of late payments
Avoiding the delay between outlay and payment helps you stay afloat in stormy markets.
With cash to invest in the growth of your business, you can take on new orders.
You can take on international business, with both suppliers and customers from global markets.
Protection against bad debt
Bad debt protection is part of a Supply Chain Finance agreement - you will not suffer if a customer fails to pay.
Increase your business agility
Having readily available cash means you can seize opportunities and buy materials when the price is right.
Many providers offer credit control services - professional but firm experts who will chase up payments on your behalf.
Download Rangewell’s free and detailed guide to Supply Chain Finance
What is Supply Chain Finance - and how it gives you a business advantage
What are the types of Supply Chain Finance - which is right for you?
How Supply Chain Finance can be perfect to fund growth
Why not all providers are equal - finding the one that’s right for you
How we can help you pay less for the arrangement you need
The downsides to Supply Chain Finance - and how to avoid them
How to arrange Supply Chain Finance - what paperwork do you need?
Key terms explained
Is Supply Chain Finance designed to help with working capital?
What are standard payment terms and is there a charge for early payment?
What other financing solutions may be more appropriate?
What about supplier finance?
How soon is cash released with an approved invoice from the financial institution?
Does both the buyer and supplier's credit rating affect the agreement?
Can Supply Chain Finance improve business cash flow?
How long does the invoiced amount take to be approved by the buyer/lender?
Is Supply Chain Finance similar to Trade Finance?
What is reverse factoring?
Does it still work with a global supply chain or large corporations?
Can I request the invoice amount to the supplier in real time?
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Frequently asked questions
Have a question?
Is supply chain finance a trade finance
Supply chain finance has recently been defined as a much broader category of trade financing as it encompasses all the financing opportunities across a supply chain. SCF is typically defined as a financial arrangement where the buyer will agree to approve his supplier's invoices for financing by a financier.
To learn more about trade finance transactions, speak to Rangewell today.
What are the risks of supply chain finance?
One of the main risks associated with supply chain finance is that banks or lenders can decide to withdraw funding or not renew a program which can happen in response to a deterioration in a customer's credit quality, decrease in market confidence, and a broader credit disruption.
To find out more about supply chain finance solutions, speak to Rangewell today.
How does supply chain financing work?
Supply Chain Finance provides short-term credit for both the buyer and the seller - and potentially the supply chain in between. Instead of relying on the creditworthiness of the supplier, the lender deals with the buyer to arrange the funds required.
Our service is:
Transparent and independent, treating all lenders equally, finding the best deals.
Every type of finance for every type of business from the entire market - over 300 lenders.
Specialist Finance Experts support you every step of the way.
We make no charge of any kind when we help you find the loan you need.