What is Supply Chain Finance?

When businesses that trade – that is buy and sell goods – are looking to boost their working capital, they may consider a supply chain finance (SCF) program. Since SCF was traditionally only offered by banks to large corporates, not all SMEs are familiar with what this program is all about.

Supply chain finance providers vary in terms of their financing criteria, process, and capabilities. Let’s take a look at the product offering of Harbor, a technology-enabled provider of SCF to middle market businesses globally.

A Working Capital Boost

Harbor’s supply chain finance program provides up to 120 days credit to buyers. Under this arrangement, suppliers are paid upon the shipment of goods and the buyer is given an opportunity to improve their accounts payable days (DPO). This optimizes the cash conversion cycle (a measure of how long input is tied up in production and sales before it is converted into cash received).

Who benefits from Supply Chain Finance?

A SCF program is advantageous to both the buyer and the seller in a trade partnership. The buyer can purchase goods on open account terms, enabling the business to sell product before paying for the goods. Simultaneously, the supplier is paid upfront by the SCF provider, without any risk of nonpayment.

Simplifying the Procure-to-Pay Process

In addition to enabling better cashflow, Harbor provides buyers with a streamlined approach to vendor and procurement management with the HarborTrade platform. With HarborTrade, buyers can initiate orders and track fulfilment and payments in one easy-to-use paperless system. The platform also allows for improved communication between buyer and supplier.

Who qualifies for a SCF Program?

SCF providers have varying criteria for businesses to which they can provide a SCF program including annual revenue, industry, and geographic location. Harbor typically works with middle market businesses from nearly all industries, located in North America, select countries in Central and South America, Western Europe, Australia and select countries in Asia. Suppliers can be located in most countries worldwide.

Harbor’s SCF program only requires underwriting on the buyer. Harbor reviews the business’s financial statements and credit profile to provide a credit limit. This limit can be used to pay suppliers of choice after they are onboarded through a self-registration process on the HarborTrade system.

What’s the first step?

Importers with a focus on growth that are looking to increase their working capital or have access to liquidity as needed should apply for a supply chain finance program. With Harbor, the process is clear and uncomplicated. The first step is to contact Harbor for an introductory phone to get to know the business. Next, the Harbor representative requests financial statements and additional information on the business. In less than a week, Harbor provides the importer with a credit limit which can be used to pay suppliers of their choice and provides access to the HarborTrade portal. Get started today.