Supply chain finance (SCF) is an ideal solution for businesses when cash flow is down. SMEs can pay their invoices early, allowing them to receive early settlement discounts and immediately improve their working capital position. Here’s how the UnLock Supply Chain Finance solution can help SMEs better manage their cash flow.
UnLock Supply Chain Finance solution: How it works
No matter what size a business may be, it needs consistent cash flow. The Unlock Supply Chain Finance solution enables suppliers to receive invoice fulfillments on time and on their terms — resulting in stable cash flow. With UnLock’s extended payment terms — buyers can choose from 30, 60 or 90 day invoice fulfilment periods — SMEs pay their suppliers upfront while improving their working capital position.
Key benefits of UnLock Supply Chain Finance for SMEs and suppliers:
- Speed and convenience: With its secure and easy credit approval and set-up process, UnLock lets buyers make immediate supplier payments as soon as they are authorised within its platform.
- Improved working capital: Buyers can increase their purchasing power through UnLock’s payment terms extension — up to 90 days — to immediately increase their working capital position and fulfil purchase orders in line with market opportunities.
- Enhanced supplier-buyer relationships: Buyers can receive early payment discounts from suppliers while maintaining extended invoice terms.
The UnLock Supply Chain Finance process
Our SCF process is straight forward for those who need it:
- Apply online for access to a limit to buy more.
- Upload supplier invoices into the secure platform and include when each one requires payment.
- Choose your extended repayment terms — 30, 60 or 90 days.
- UnLock approves your unpaid invoices and pays your suppliers on their terms.
The outcome is improved cash flow for all parties involved: Buyers receive greater access to credit at affordable costs — and without the need for real estate security — while suppliers get invoices fulfilled on time.
What is supply chain finance?
Supply chain finance allows suppliers to receive early payments on their invoices. Doing so lets suppliers fill orders before payments are made, preventing the risk of global supply chain disruption and empowering buyers and suppliers to maintain sufficient working capital.
“A financier pays for orders on a buyer’s behalf, with the buyer repaying the financier based on a predetermined plan.“
Supplier finance is similar to a supply chain loan. It differs, however, in that the financier’s money goes toward the seller or supplier with whom the buyer has already placed an order, whereas supply chain loans allow borrowers to spend the funds as they choose.
While there are multiple strategies and techniques that fall under the umbrella of supply chain finance, all concepts adhere to the same objective: Allow suppliers to receive fast payments in line with their terms — or earlier — so they can maintain the cash flow they need to continue providing buyers with goods.
How supply chain finance works
There are three key parties involved in the supply chain finance model: the buyer, seller and the finance provider. Buyers enter into agreements with a supply chain finance provider — who may be an individual, financial institution or third-party lender — to help them fulfil seller invoices on time, take advantage of supplier early payment discounts and improve their bottom line.
Breaking the supply chain financing process into steps, the process looks like this:
- A buyer places an order for goods or services from a supplier.
- The supplier fulfils the order and issues an invoice to the buyer with designated payment terms.
- The buyer approves the payment terms on the invoice and sends the invoice to the financier.
- The financier provides the supplier with the requested payment on time or earlier than the timeframe listed on the invoice terms.
- The buyer repays the financier based on agreed-upon terms.
Benefits of supply chain finance
Supply chain finance is a solution that provides numerous benefits to SME suppliers and buyers: Buyers enjoy lengthier payment terms while suppliers continue to receive cash flow for their goods or services.
The process allows
- Receive timely payments: Supply chain financing ensures suppliers receive invoice payments fast, on time and in full — empowering them to remove overdue accounts and debts from their balance sheet.
- Create better payment terms: Through supply chain finance, buyers have more time to fulfil invoices, creating stronger buyer-seller relationships.
- Increase working capital: By receiving early and timely invoice payments, suppliers reduce their days sale outstanding (DSO), improve their working capital position, pay for supplies as soon as they receive payment from buyers — reducing supply chain risk — and expand their business to increase cash flow.
- Improve cash flow financing: Since suppliers receive greater certainty over when they will receive payments, they can better forecast cash flow and make more informed decisions to accelerate business growth.
For buyers, supply chain financing benefits include:
- Improving working capital position: Buyers can extend their payment terms to ensure optimal cash flow and working capital while still repaying debts on time. With more working capital, buyers can make business purchases when they are needed and allocate working capital for other business expenditures.
- Strengthening supplier relationships: SCF allows buyers to work with financiers to select a payment plan that fits their cash flow. Financiers fulfil supplier invoices on behalf of the buyer and in line with the invoice payment terms. Thus, buyers enhance supplier relationships by fulfilling the invoice amount in a timely fashion.
- Reducing or eliminating supply chain disruptions: Financiers ensure all supplier invoices are fulfilled, enabling suppliers to bridge cash flow gaps and continue their supply chain operations.
- Supporting better business growth: Supply chain finance improves the working capital position for buyers by providing faster credit access at a lower cost than other lending options and not requiring real estate security.
How suppliers and buyers use supply chain finance
Supply chain finance has been used by a wide array of global businesses and professionals for decades. Some of the most prominent industries leveraging SCF programmes include:
- Consumer goods and ecommerce.
- Communication and IT.
- Transportation, logistics and shipping.
- Commodity providers.
Supply chain finance programmes cater to SME suppliers that have limited access to financial resources and work with buyers who maintain elevated credit statuses. By leveraging supply chain finance programmes, the supplier can:
- Receive payment on time and in full.
- Improve working capital position and business cash flow.
- Minimise the risk of financing products.
Buyers who utilise supply chain finance programmes require fast, streamlined access to products from a variety of companies. Therefore, buyers will often rely on an SCF arrangement to fulfil invoices from multiple suppliers and maintain mutually beneficial relationships with each one. Buyers will use supply chain finance to:
- Make purchases as needed among multiple suppliers.
- Increase working capital position and use that capital to make other business purchases.
- Create flexible payment options that align better with their working capital and prevent debt accumulation.
Maximise supply chain finance benefits with UnLock
Supply chain finance platforms like UnLock make it easy for both suppliers and buyers to leverage SCF programmes and maximise their working capital.
UnLock provides a debt-free finance option to buyers without relying on property as collateral to secure the finance. Instead, UnLock pays suppliers on their terms while buyers enjoy an extended payment term. Buyers can choose from 30, 60 or 90 day terms, empowering them to enhance their working capital position and get more purchasing power while suppliers can keep their cash flow moving. The platform is secure and gives buyers and sellers the liquidity they need to maintain business operations.
Buyers: Enquire here to learn how UnLock can help you increase your working capital and extend your supplier payment terms.
Suppliers: Enquire here to explore how UnLock’s platform helps your business receive invoices on time and in full.