Supply-chain for any product line needs finance to sustain the cycle of procurement/production/processing/logistics/end use. There are primarily following options to raise finance.
Seller assigns medium to long-term receivables to financial institution and buyer pays to financial institution on maturity. 100% value is paid to seller by financial institution. This option is primarily for international transactions based on financial instruments such as L/C, Promissory Notes,etc.
Financial institution purchases receivables from seller at discount and pays 80% of face value immediately and balance upon receipt of payment from buyer. This helps seller pay its suppliers in time and enjoy better credit rating for future business. Factoring is very popular way for financing export shipments as supply-chain cycle is longer than domestic business.
Buyer can procure finance against accounts payables which would help arrange shipments to overseas customers in time.
