SCF holds substantial promise and possibilities for cost reduction for the clients as supply chain financing costs are often as much as the costs associated with transportation and distribution.

On the prospects and challenges of Supply Chain Financing (SCF) and its difference from Working Capital Financing (WCF) Corporates or Industry Majors (IMs) are dependant on a large number of external entities for sourcing raw materials, components, sub-assemblies, services, etc., and for distribution of their products so as to reach the end consumer and realize cash.

This chain of entities constitutes the supply chain. Goods move forward in a supply chain with the payment moving backwards. In a limited way, SCF can be said to be the financing of the receivables of participants in the supply chain while reducing or eliminating counterparty credit risk through intermediation. SCF provides an integrated package for meeting the end-to-end financing and operational information requirements of the IM’s supply chain management systems. Traditional WCF relies on conducting due diligence by independent verification of the borrower’s business capability, track record, anticipated future sales, financial capability, credibility, standing, etc., in the pre-sanction stage, and on ongoing collection and processing of data on the assets forming the basis of lending like the physical verification and inspection of inventory in the post-sanction stage.

The Analyst Magazine, Supply Chain Financing, Working Capital Financing, Supply Chain Management, Operational Information Requirements, Risk Parameters, Credit Risk, SCM Functions, Risk Management, Enterprise Resource Management, ERP System.