Companies Offer Supply-Chain Financing to Vendors as They Bulk Up on Inventory, Push Out Payment Terms

More companies are offering supply-chain financing to their vendors, a tool that allows them to pay their bills later while also providing suppliers with faster access to cash.

Supply-chain financing can boost the cash position of both buyers and sellers. A third party, often a bank, pays a vendor’s invoices but takes a cut. The company pays the bank the amount that was due under the invoice, though at a later date than originally required. The bank’s cut is determined by the company’s credit rating.

Supply-chain snarls over the past two years have prompted businesses to home in on whether key vendors have sufficient cash flow to stay afloat after many companies delayed supplier payments during the early stages of the pandemic. As a result, vendors were paid late or not at all.