Supply Chain Finance Explained
How vendor, dealer and channel finance help buyers and suppliers manage cash flow across the supply chain.
Supply chain finance (SCF) uses the strength of a large, creditworthy buyer, often called an anchor, to help the businesses around it get funded more easily and cheaply. It links financing to the actual flow of goods and invoices in a supply chain.
Common structures
- Vendor finance: suppliers get paid early on invoices raised to the anchor buyer.
- Dealer and distributor finance: funding for dealers and distributors who buy stock from a manufacturer.
- Channel and retailer finance: working capital for the downstream channel.
- Reverse factoring: the buyer-led arrangement where the buyer approves invoices and the supplier is paid early.
- Purchase and raw material finance: funding to buy inputs and inventory.
Why businesses use it
- Suppliers improve cash flow without waiting for long payment terms.
- Buyers can extend payment terms while keeping suppliers healthy.
- Funding decisions lean on the anchor's credit quality, which can lower the cost for smaller partners.
What lenders look at
- The anchor's credit standing and track record.
- The history of trade between the anchor and each supplier or dealer.
- Quality of invoices, purchase orders and delivery records.
Loanbazaar lists these and related products, including MSME supply chain finance and bill discounting, in its Supply Chain Finance category.
Frequently asked questions
Who is the anchor in supply chain finance?
The anchor is the large, creditworthy buyer or manufacturer around which the financing is organised.
Is supply chain finance only for large companies?
No. It is often most useful for smaller suppliers, dealers and distributors who borrow on the strength of an anchor relationship.
What is reverse factoring?
A buyer-led arrangement where a financier pays the supplier early against invoices the buyer has approved.
This page is for general information only and is not financial, legal or tax advice. Loanbazaar is a loan distributor and connects businesses with lending partners; it does not lend directly. Terms, eligibility and approval are decided by the lender.