What is “Supply Chain Financing”?
In today’s fast-changing business world, working capital isn’t just a measure of liquidity anymore; it’s a strategic tool for driving growth. Yet many CFOs still face a constant challenge: how to support suppliers’ and customers’ liquidity needs without puƫng pressure on their own cash flow. This is where Supply Chain Finance (SCF) comes in. It’s a collaborative, tech-enabled solution that helps optmize payment terms with the buyers and suppliers, improving cash flow for everyone in the value chain. In simple terms, SCF allows suppliers to get paid early and buyers get an extended credit period, often through a lender (Bank/NBFC), resulting in improved cash flow for all parties involved.
Why Now?
The traditional, bank-led financing model is slow, document-heavy and limited by balance sheet-based underwriting, which has given way to a tech-driven, data-led ecosystem. With the rise of digital invoicing, e-commerce supply chains, and real-time transaction data, CFOs now have access to financing solutions at the transaction level, not just at the entity level. This shift is powered by:
- Digital supply chains that provide real-time visibility into trade flows and receivables.
- Fintech-led platforms are integrating with ERP and procurement systems to assess creditworthiness instantly.
- API-driven ecosystems connecting buyers, suppliers, and financiers seamlessly.
As a result, Supply Chain Finance is being reimagined, from a bank product to a strategic CFO-led initiative for cash flow efficiency, supplier & buyer empowerment, and balance sheet optimization.
The CFO’s dilemma: why “Supply Chain Finance” matters?
CFO priority
For every CFO, managing working capital efficiently is the key to business performance. The constant balancing act involves maintaining liquidity for operations, optimizing the cost of capital, and ensuring supplier stability, all while dealing with fluctuating markets and stretched payment cycles. Today’s CFO isn’t just a guardian of the company’s finances anymore. They’re a strategic driver of cash flow, making sure every rupee is put to work in the most effective way across the entire value chain.
The challenges
As supply chains expand and margins compress, CFOs face increasing pressure to extend payables and preserve cash, often at the expense of supplier relationships. This tension creates a ripple effect: reduced supplier capacity, higher procurement risks, and potential disruption to production or fulfilment in the supply chain. To make the situation worse, CFOs today are also dealing with fluctuating interest rates, unpredictable demand cycles, longer cash conversion times, and declining margins. Traditional financing models simply can’t keep pace with these competing demands; these are too slow, non-flexible, and often disconnected from the realises of modern business.
The solution
Supply Chain Finance as a “Strategic Lever” Supply Chain Finance (SCF) offers CFOs a way to unlock liquidity without compromising on supplier or customer relationships. For CFOs, SCF isn’t just a financing tool; it’s a strategic lever to:
- Improve cash conversion cycles and reduce financing costs
- Strengthen supplier ecosystems and ensure supply chain reliability
- Free up capital for growth, innovation, or debt reduction
Use Cases in Action
Manufacturing (Food-FMCG)-
A mid-sized food manufacturer implemented a “Purchase Invoice Discounting (PID)” program for its suppliers; through this program, suppliers received early payments within 24 hours of receipt of goods.
The result: The manufacturing company got an extended credit period to repay the dues, its supplier relationship improved & since the payment was made within hours of goods received, the supplier even offered a cash discount to the company, which in turn was used to arbitrage the interest cost on the PID limit.
Trading & distribution:
A large electrical distributor implemented an “Anchor-led Supply Chain Financing (SCF)” program for its buyers. Through this program, buyers had the option to enjoy an extended credit period and at the same time, the distributor received early payments within 24 hours of dispatch of goods.
The result: The distributor realised cash within a few hours of dispatch of goods, hence improved working capital, reduced the risk of recovery since the lender took the responsibility to collect the money on behalf and at the same time, the buyers (retailers/wholesalers) got an extended credit period at nominal cost.
Your next finance leadership role is just a click away — explore CFO and Finance Head opportunities now.
About the Author: Neeraj Daultani is a Chartered Accountant with over 11 years of experience in Finance, Risk, and Credit Underwriting. He has successfully built finance and credit/risk functions from the ground up and brings deep expertise in financial management, lending partnerships, credit underwriting, and risk management.
If you’re a senior finance professional and wish to collaborate on a similar article, write to jinesh@corenza.co