Supply chain finance

A supply chain finance programme sits between a large buyer and the suppliers it depends on. The buyer approves an invoice for payment in the normal way, and the funder then offers the supplier immediate settlement of that approved invoice at a discount. When the original due date arrives, the buyer pays the funder rather than the supplier. Nothing about the underlying commercial contract changes.

The distinguishing feature is whose credit is being priced. Because the funder is relying on an irrevocable payment obligation from a large, well rated buyer, the discount reflects that buyer's cost of funds plus a margin. For a mid sized supplier selling into a listed corporate, that is frequently far cheaper than any facility it could arrange on its own balance sheet.

Receivables finance is supplier led. The supplier borrows against its own sales ledger, the facility appears on its balance sheet, pricing follows its own credit profile, and the funder carries dilution and verification risk across the whole book. Supply chain finance is buyer led, applies only to invoices the buyer has already approved, and removes most of that risk from the equation.

In practice the two coexist. A supplier with one dominant customer and a long tail of smaller ones will often join the anchor buyer's programme for the concentrated exposure and run an invoice discounting line for the rest. GFG structures the split so that the two facilities do not conflict over security or over the same receivables.

Buyers rarely run these programmes as a favour. A stable supplier base is a procurement asset, and a supplier that is not starved of cash is a supplier that delivers on time, holds pricing and stays solvent through a downturn. Buyers commonly negotiate longer standard payment terms or improved unit pricing in exchange for giving suppliers access to early payment at rates they could never reach alone.

The buyer also keeps its own working capital intact, because it settles on the original due date rather than paying early out of its own cash. Programme economics are usually reviewed alongside days payable outstanding targets and any covenant that references trade payables, since a poorly structured programme can attract scrutiny over whether payables have effectively become borrowings.

Classification is the point buyers get wrong most often. Where the programme leaves commercial terms, payment dates and the nature of the obligation unchanged, the amounts generally stay within trade payables. Where the buyer's payment terms are extended well beyond industry norms, or the funder obtains rights the original supplier never had, auditors may reclassify the balance as borrowings.

Disclosure requirements have tightened across major reporting frameworks, and listed buyers are now expected to describe programme terms, the carrying amounts involved and the liquidity risk concentration they create. GFG works with the buyer's finance team and auditors before launch so that the structure chosen matches the accounting outcome the business wants.

The operational work in a programme is supplier onboarding. Each supplier signs a receivables purchase agreement with the funder, passes know your customer and sanctions screening, and connects to the platform that shows approved invoices and offers early payment pricing. A well run onboarding wave covers the buyer's top suppliers by spend first, since a small number of relationships usually account for most of the value.

Cross border programmes add withholding tax analysis, assignment validity under local law, currency handling and local language onboarding for supplier finance teams. GFG maps the supplier base by jurisdiction before selecting a funder, because platform coverage and legal comfort vary widely between providers once a programme moves outside its home market.

We start from the payables data: annual approved spend, supplier concentration, average payment terms, dispute rates and the jurisdictions involved. That determines whether a single bank programme, a multi funder platform or a private credit backed structure is the right fit, and what pricing the anchor buyer's rating should command.

We then run a competitive process with funders active in the buyer's markets, negotiate programme documentation and pricing grids, and coordinate the onboarding waves with the buyer's procurement and treasury teams. Suppliers approaching us directly are helped to build the case to their buyer, which is often the faster route into a programme that does not yet exist.