What is supply chain financing?

There are two primary types of supply chain financing:

2. 1.  Factoring of Receivables (not guaranteed by buyer)
3. Many third-parties are willing to purchase an approved invoice or receivable from a supplier at a discount, and then collect the full value at the net term date — improving the cash flow of suppliers, at a cost. If the payment is not guaranteed by the buyer, there is a "hold back" of typically 20 percent until the net date. This effectively increases the discount rate charged to the supplier.
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5. 2.  Reversed Factoring of Receivables (guaranteed by buyer)
6. In this case, a third-party is willing to purchase the approved invoice or receivable from a supplier at a discount and then collect the full value at the net term date. If the payment is guaranteed by the buyer, there is no "hold back" until the net date; this decreases the discount rate charged to the supplier.
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Both approaches enable businesses to achieve discounts on purchases, while helping ensure the financial viability of their suppliers through timely payment.