The midsize and small suppliers are particularly affected by the pandemic scenario. Most of these companies are still trying to revive themselves from the harsh effects of this great recession. Many companies have experienced such dramatic disruption in the cash flow. Payments became uncertain as the materials and products stood idle in the warehouses and the shipping containers.
But with the supply chain finance, these companies and small enterprises could bring back flexibility and stability into their business as they can procure materials because of the lower cost of capital. From keeping the focus on the survival of these businesses, one can improve the efficiency and innovation of the business. Supply chain finance can also help these companies to invest in new products.
They need to get the assurance that they can pay their suppliers in the given stipulated time. However, with the solution of the supply chain finance, one can also pay these suppliers earlier than regular payments. However, this system helps to lower down the cost for both the buyer and the seller. It requires the help of any cloud-based platform to which both the suppliers and the buyers will have access. At the core, this financing solution is reverse factoring. The buying organisation can use the third-party funder for extending the payment terms. But it offers early payment to its suppliers.