Invoice finance vs Supply chain finance
Both release cash from an unpaid invoice. The difference is who sets the arrangement up and whose credit rating the pricing is based on, and that determines which one is actually available to you.
| Criterion | Invoice finance | Supply chain finance |
|---|---|---|
| Arranged by | The supplier | The buyer, for its suppliers |
| Priced against | The supplier's own risk profile | The buyer's credit rating |
| Typical cost | Higher for smaller suppliers | Lower where the buyer is strong |
| Coverage | Whole ledger or selected invoices | Only invoices to that one buyer |
| Control | Sits with the supplier | Sits with the buyer's programme |
| Availability | Broadly available | Only if the buyer runs a programme |
In supply chain finance the funder is effectively taking the buyer's credit risk, because the buyer has approved the invoice for payment. A small supplier selling to a large investment grade buyer can therefore access funding at a cost close to the buyer's own, which no standalone facility would match.
Invoice finance prices the supplier's risk as well as the buyer's, so the same supplier will pay more for a facility they arrange themselves.
A buyer programme covers one buyer. Almost every supplier sells to several, and the rest of the ledger remains unfunded. Invoice finance covers the whole book, which is why the two are frequently used together.
There is also a control issue. A buyer can change or withdraw its programme. A facility you hold yourself does not disappear because a customer changed treasury policy.
Look at whether joining is conditional on accepting longer payment terms. A programme that extends terms from forty five to ninety days, then offers early payment at a discount, may leave the supplier no better off than before.
Also check whether participation restricts you from funding those same invoices elsewhere, since that can conflict with an existing facility's security.
Take a buyer programme where one is offered and the terms are not extended to pay for it, and hold your own invoice finance facility for everything else.
Yes, provided the invoices in the buyer programme are carved out of your own facility so the two do not conflict.
Generally it is treated as a sale of a receivable rather than borrowing, though the accounting should be confirmed case by case.
Yes, and large buyers are often receptive because it improves supply chain stability at little cost to them.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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