Your invoice book
- Names of your main buyers (the customers who pay you)
- Typical payment terms with each buyer (30, 60, 90 days)
- Average invoice value and frequency
- Whether any buyer already runs a supply chain finance programme
Supply chain finance
Also known as reverse factoring, supplier finance, payables finance or confirming. A way for suppliers to get paid early on approved invoices, using their buyer's credit rating to access better rates than they could get on their own.
- Get paid within days of invoice approval, not 30 to 120 days later
- Pricing based on your buyer's credit rating, not yours
- Also called reverse factoring, payables finance or supplier finance
- Independent commercial finance broker
Last updated: June 2026
What is supply chain finance?
Supply chain finance is a way for a supplier to get paid early on invoices that their buyer has already approved. A finance provider pays the supplier shortly after the buyer approves the invoice, and the buyer pays the finance provider on the original due date.
The product goes by several names. You may see it called reverse factoring, supplier finance, payables finance, approved payables finance or confirming. These are largely interchangeable. The terminology varies by lender and by sector.
The key feature, and what makes supply chain finance different from invoice finance, is that pricing is based on the buyer's credit rating, not the supplier's. This usually means a smaller supplier with a large corporate customer can access cheaper funding through this route than through their own borrowing capacity.
How supply chain finance works
Five steps from invoice raised to early payment received.
- 01
Supplier delivers goods or services
You complete the work or ship the goods and issue an invoice to your buyer on standard payment terms (typically 30, 60, 90 or 120 days).
- 02
Buyer approves the invoice
The buyer reviews and approves the invoice on their supply chain finance platform, confirming they will pay it in full on the due date.
- 03
Supplier requests early payment
Once the invoice is approved, the supplier can opt to receive early payment through the lender that runs the buyer's programme. This is usually within a day.
- 04
Lender pays the supplier
The lender pays the supplier 90% to 100% of the invoice value, minus a small fee. The fee is set by the buyer's credit profile, not yours.
- 05
Buyer pays the lender
On the original due date, the buyer pays the lender the full invoice value. The supplier has already received their funds. The buyer has effectively kept their working capital for the full payment term.
How to get started with supply chain finance
Supply chain finance is set up by the buyer, not the supplier. Before you can use it as a supplier, your buyer needs to have an active supply chain finance programme with a lender.
Three scenarios are common:
Your buyer already has a programme. Many large corporates and retailers run supply chain finance programmes for their supplier base. Ask your buyer's accounts payable or procurement team if one exists and how to opt in. The setup is usually quick (often a day) once you are invited.
Your buyer does not have a programme, but might. If your buyer is a large company with a strong credit rating, they may be open to setting one up. We can introduce you (and them) to lenders that run supply chain finance programmes for UK corporates.
Your buyer is unlikely to set up a programme. If your buyer is similar in size to you, or smaller, or has a weak credit profile, supply chain finance is probably not the right product. In this case, invoice finance is the supplier-led equivalent. With invoice finance, you can access cash against your unpaid invoices regardless of your buyer's setup, based on your own business profile and customer book.
Not sure which one applies? Tell us about your buyer and your invoice profile in the enquiry form. We will tell you whether supply chain finance, invoice finance or another option is the right route. No obligation to proceed.
What you'll need
A few details up front let us understand whether supply chain finance is the right fit, or whether invoice finance suits you better.
Your business
- Companies House number and trading name
- Date of incorporation and length of trading
- Annual turnover and sector
- Last 6 months of business bank statements
- Most recent year-end accounts, or management accounts if newer
Buyer information
- Sizes and sectors of your main buyers
- Whether any of your buyers are UK-listed corporates, multinationals or large retailers (this matters for SCF feasibility)
- Any existing supplier portal access you have with those buyers
We do not run a credit search at the enquiry stage. A formal search happens only once you accept a lender's offer.
Types of supply chain finance
Supply chain finance is an umbrella term. The most common variants are approved payables finance, dynamic discounting, inventory financing and reverse factoring. They all share the buyer-led mechanic but differ in structure.
- Approved payables finance
- The most common form of supply chain finance. The buyer approves an invoice, the supplier opts in for early payment, and the lender pays the supplier upfront. The buyer pays the lender on the original due date. Pricing reflects the buyer's credit rating.
- Dynamic discounting
- A variant funded by the buyer rather than a third-party lender. The supplier offers the buyer a discount on the invoice value in exchange for early payment. The buyer pays the supplier from their own cash, earning an effective return on their working capital. No lender is involved.
- Inventory financing
- A lender funds the supplier's inventory or work-in-progress, secured against the goods themselves, ahead of the sale completing. Sometimes treated as a sub-product of supply chain finance, sometimes as a separate asset-based product.
- Reverse factoring
- Strictly speaking, reverse factoring is a synonym for approved payables finance. Most lenders use the terms interchangeably. The "reverse" refers to the fact that the buyer initiates the arrangement, unlike traditional factoring where the supplier initiates.
How supply chain finance compares to invoice finance, trade finance and purchase order finance
These four products are often confused. They all help businesses bridge cash flow gaps, but they sit at different points in the trade cycle and have different mechanics.
| Feature | Supply chain finance | Invoice finance | Trade finance | Purchase order finance |
|---|---|---|---|---|
| Who initiates | Buyer | Supplier | Buyer or supplier | Supplier (with confirmed PO) |
| When in the trade cycle | After invoice is approved | After invoice is issued | Before goods are shipped | Before goods are produced or shipped |
| Who is the borrower | Buyer | Supplier | The party with the funding need | Supplier |
| Pricing based on | Buyer's credit rating | Supplier's credit and customer book | The party being funded | Supplier and end customer |
| Typical use case | Large buyers paying SME suppliers | SMEs needing cash against unpaid invoices | International import or export | Fulfilling a confirmed purchase order |
| Available to a supplier without buyer involvement? | No | Yes | Yes, for the buyer side | Yes |
| Best for | Suppliers selling into corporate buyers | Most SMEs with B2B sales | Importers, exporters, cross-border trade | Resellers and distributors fulfilling orders |
These are the most common UK-market structures. Some lenders blur the categories or use different terminology.
Is supply chain finance right for your business?
Supply chain finance works best for suppliers selling into large, creditworthy buyers that run (or would run) a programme.
-
You supply large or corporate buyers
The buyer needs to be creditworthy enough that a lender is willing to advance against their payables. Listed corporates, large retailers, multinationals and government bodies are typical.
-
Your buyer already has a programme, or might set one up
If your buyer does not have a supply chain finance programme and is not the type of business that would set one up, this product is not for you. Invoice finance is the alternative.
-
You have established trading history
Most supply chain finance programmes require suppliers to be trading for at least a year or two with a clean payment history.
-
Your invoice values fit the programme limits
Some programmes have minimum and maximum invoice values. Very small orders may not be eligible.
-
You are happy to receive slightly less than the full invoice value
Early payment comes with a fee deducted from the invoice. The fee is usually small (because it is based on the buyer's credit rating), but it is not zero.
Pros and cons of supply chain finance
Supply chain finance can offer cheaper early payment, but access depends entirely on your buyer.
Pros
- Get paid within days instead of 30 to 120 days
- Pricing usually lower than invoice finance because it is based on the buyer's credit
- No need to take on debt, it is a sale of receivables
- Does not encumber your assets, so can sit alongside other facilities
- Strengthens the buyer relationship and can help win larger contracts
Cons
- You cannot use it unless your buyer sets up a programme
- A fee is deducted from each invoice you discount, so you receive less than face value
- Only invoices on the buyer's programme are eligible, not your full sales ledger
- Buyer can cancel or amend the programme, removing your access
- May not work for smaller suppliers selling to mid-market or SME buyers
How much does supply chain finance cost?
The cost is taken as a fee from each invoice you opt to receive early. Because the lender prices off the buyer's credit rating, fees are usually lower than what the same supplier would pay on invoice finance.
Discount fee
0.99% to 3%
Typically a bundled fee charged on the invoice value, covering the cost of early payment. The exact rate depends on the buyer's credit rating and how early the invoice is paid.
Arrangement fee
Usually applies
Most facilities carry a one-off arrangement fee to set up the programme. The amount varies by lender and facility size.
No interest, no debt: Supply chain finance is structured as a true sale of receivables, not a loan. There is no compounding interest and no debt on either party's balance sheet (subject to accounting treatment, see below).
Tax and accounting considerations
Supply chain finance has some specific accounting questions that have attracted regulatory attention in recent years. These affect both suppliers and buyers.
01 Balance sheet: suppliers
Supply chain finance is typically treated as a true sale of receivables for the supplier. The invoice leaves the balance sheet when sold to the lender, in exchange for cash. This means SCF does not appear as debt on the supplier's balance sheet.
02 Balance sheet: buyers
The buyer's accounting treatment is more contested. Some buyers have historically treated SCF arrangements as ongoing trade payables rather than financial debt. After the 2021 Greensill collapse, accounting standards bodies have issued guidance requiring greater disclosure. Treatment varies by structure and accounting standard (IFRS or UK GAAP).
03 VAT treatment
VAT on the underlying invoice is unaffected by the SCF arrangement. The buyer reclaims VAT on the original invoice as normal, and the supplier accounts for output VAT on the original invoice value. The fee charged by the SCF lender to the supplier is generally outside the scope of VAT or VAT-exempt as a financial service, though this can vary.
This is general guidance, not tax or accounting advice. The accounting and VAT treatment of supply chain finance depends on the specific structure of your facility, your accounting framework, and your circumstances. Always speak to a qualified accountant or tax adviser before entering a supply chain finance arrangement, particularly as a buyer running a programme.
How FundingLinks helps with supply chain finance
We help you find the right route, whether that is supply chain finance, invoice finance or something else.
- 01
Tell us about your situation
Share your business details, your main buyers, and your typical invoice terms. We will quickly establish whether supply chain finance is feasible, or whether invoice finance is the better route.
- 02
We assess the route
For suppliers whose buyers run programmes, we connect you with the right lender. For suppliers whose buyers might set up a programme, we can introduce both sides. For suppliers where SCF is not feasible, we move the enquiry to invoice finance.
- 03
You choose your option
If we identify an SCF or invoice finance path, you review the offer, terms and pricing. No obligation until you accept an offer.
- 04
Funds in your account
Once documentation is signed and onboarding is complete, you can start drawing early payments against approved invoices.
Why businesses choose FundingLinks
Specialist support for UK SMEs looking to compare supply chain finance, invoice finance and working capital options.
- 100+
- UK lenders compared
- 500+
- SMEs funded
- 35+ years
- Combined commercial finance experience
Whole-of-market panel
100+ UK lenders, including high-street banks, challenger banks, specialist lenders and alternative finance providers. We are an independent broker, not tied to any single lender.
Specialist, founder-led support
Founded by Sam Wells and Chris Findlow, with 35+ years' combined experience in commercial finance. You speak to specialists, not a call centre.
Clear process, secure portal
Track your enquiry, review lender offers and exchange documents in one secure portal. No email chains, no spreadsheets, full visibility from enquiry to drawdown.
Free to compare, success-based fees
No upfront charge to use FundingLinks. Fees apply only if you proceed with a facility, and they are agreed in writing before you commit.
Supply chain finance FAQs
Direct answers to the questions suppliers and business owners usually ask about supply chain finance.
What is supply chain finance?
Supply chain finance is a way for a supplier to get paid early on invoices that have been approved by their buyer. A lender pays the supplier shortly after invoice approval, and the buyer pays the lender on the original due date. The pricing is based on the buyer's credit rating, not the supplier's, which usually makes it cheaper than other funding routes for the supplier.
What are the other names for supply chain finance?
Supply chain finance is also called reverse factoring, supplier finance, payables finance, approved payables finance, and confirming. These terms are largely interchangeable. The labelling depends on the lender and the sector.
As a supplier, can I get supply chain finance directly?
Not on its own. Supply chain finance is set up by your buyer, not by you. Your buyer needs to have an active supply chain finance programme with a lender before you can opt in. If your buyer does not have a programme, invoice finance is the supplier-led alternative and is what most SMEs in this situation actually need. We can help you compare invoice finance options as part of the same enquiry.
How is supply chain finance different from invoice finance?
Both let a supplier get paid early on an invoice. The differences are: who initiates (buyer for SCF, supplier for invoice finance), who the lender prices off (buyer's credit for SCF, supplier's profile for invoice finance), and access (SCF only works if your buyer has set up a programme, invoice finance is available based on your own business).
How is supply chain finance different from trade finance?
Trade finance funds the purchase of goods, usually for international import or export, before the goods are shipped or delivered. It typically uses instruments like letters of credit. Supply chain finance funds an invoice after delivery and after the buyer has approved the invoice. Trade finance is about getting goods moved. Supply chain finance is about accelerating payment once the goods or services are delivered.
How is supply chain finance different from purchase order finance?
Purchase order (PO) finance funds the cost of producing or sourcing goods to fulfil a confirmed purchase order, before delivery. Supply chain finance kicks in after delivery and after the buyer approves the invoice. PO finance is supplier-led, SCF is buyer-led. The two products can sometimes be used together at different stages of the same order.
How is supply chain finance different from reverse factoring?
Strictly speaking, reverse factoring is a synonym for the most common form of supply chain finance (approved payables finance). Some lenders use the terms interchangeably, others use "supply chain finance" as a broader umbrella that includes reverse factoring, dynamic discounting and inventory finance. In practice, ask the lender how they define the product.
Who sets up supply chain finance, the buyer or the supplier?
The buyer. The buyer agrees terms with a lender to set up a supply chain finance programme, then invites their suppliers to opt in. Suppliers cannot set up SCF independently. If you are a supplier and your buyer does not run a programme, the equivalent supplier-led product is invoice finance.
What does supply chain finance cost?
The cost is a fee deducted from each invoice you choose to receive early, typically a bundled charge of around 0.99% to 3% of the invoice value. Pricing is based on the buyer's credit rating, not yours, which usually makes it cheaper than other supplier-side funding routes. There is normally also a one-off arrangement fee to set up the facility.
How quickly can I get paid?
Once the buyer has approved the invoice and the supplier has opted into the programme, early payment is usually transferred within one working day.
Is supply chain finance suitable for SMEs?
It can be, but only if the SME is selling into a buyer that runs a supply chain finance programme. The product was originally designed for large corporates and their supply base. SMEs supplying other SMEs are usually better served by invoice finance, which is supplier-led and based on the SME's own business profile.
Is supply chain finance regulated by the FCA?
Supply chain finance arrangements with limited companies for business purposes are typically unregulated. The Greensill Capital collapse in 2021 prompted increased disclosure and accounting scrutiny on SCF, but the product itself sits outside FCA consumer credit regulation in most commercial cases. FundingLinks works only on unregulated commercial finance for UK businesses.
Related products
Other funding options that can work alongside, or instead of, supply chain finance.
Not sure if supply chain finance or invoice finance is right for you?
Tell us about your buyers and invoice profile, and we will tell you which route makes sense. No obligation, no impact on your credit score.
Written by
Sam Wells
Co-Founder, FundingLinks
Sam Wells co-founded FundingLinks alongside Chris Findlow, after more than 10 years in invoice finance and alternative lending, including senior broker and partnership roles at Kriya. He helps SMEs access competitive funding by matching them with the right lender, product and structure for their stage of growth.
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