Published on Jun 2, 2025Updated on Jun 3, 2025
Efficient cash flow management is essential for businesses to remain competitive. Supply Chain Finance (SCF) has become a powerful tool that enterprises use to strengthen relationships between them and their suppliers. It enables buyers to extend their payment terms while allowing suppliers to receive early payments. This article covers how supply chain finance works, its benefits, and its growing presence in markets like India.
SCF is a set of financial supply chain management solutions that improve cash flow and liquidity for both buyers and suppliers. It is also known as reverse factoring. It helps suppliers receive early payments while also allowing buyers to extend their supply chain credit terms.
In other words, the SCF meaning in business refers to a model where suppliers get paid earlier and buyers get extended time to settle their payables. Supply chain funding solutions are usually led by the buyer and facilitated by a third-party financial institution.
The SCF process starts when a buyer partners with an SCF provider. Suppliers are then onboarded to the programme. After delivering goods or services, the supplier submits an invoice. Once approved by the buyer, the supplier can choose to receive early payments from the funder, who pays on behalf of the buyer. The buyer then settles the amount with the funder on the due date. This buyer-led model reduces financing costs for suppliers by leveraging the buyer’s credit rating.
The SCF process flow can be automated through digital platforms, including features such as dynamic discounting in SCF. This leads to improved working capital optimisation, lower risk, and stronger supply chains for all parties involved.
There are many SCF benefits for buyers and suppliers, some of which are:
For example, Company A orders goods from Supplier Z, who delivers them along with an invoice stating that the payment has to be made in 30 days. If Supplier Z needs early payment, they can utilise Company A's SCF partner. The SCF partner pays Supplier Z on time after a small service fee charge. Company A, in turn, benefits from extended supply chain credit terms and gains an extra 30 days to settle the invoice. This arrangement improves Supplier Z’s cash flow while allowing Company A to manage its working capital better. This creates a mutually beneficial partnership.
The SCF market in India is expanding rapidly, driven by digital innovation and strong regulatory support. Platforms like the Trade Receivables Discounting System (TReDS) have enabled better access to finance for MSMEs, who often struggle with delayed payments and high borrowing costs.
Supply chain funding solutions are now more accessible, cost-effective, and efficient – helping businesses improve financial stability and resilience.
SCF offers faster access to funds for suppliers and improves buyers’ working capital. With increasing government support and wider adoption by financial institutions, SCF is becoming a critical enabler of business continuity, especially for MSMEs.
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It’s a financing model where funders help improve cash flow between buyers and suppliers through early payments and extended credit terms.
In India, SCF operates via financial institutions and platforms like TReDS. This helps MSMEs receive early payments while buyers get longer payment terms.
Large corporations, MSMEs, suppliers, and buyers across different industries use SCF for better working capital management.
SCF offers faster payments for suppliers, extended credit for buyers, reduced credit risk, and improved supply chain stability.
Trade finance typically supports international transactions, whereas SCF focuses on improving domestic buyer-supplier cash flow relationships.
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