Supply chain finance (or supply chain financing, abbreviated to SCF) is a form of financial transaction initiated by the ordering party (a business customer) in order to help its suppliers to finance their receivables more easily and at a lower interest rate than the rate available commercially. Similarly, under reverse factoring, a third party facilitates an exchange by financing the supplier on the customer's behalf. The term also refers to practices used by banks and other financial institutions to manage capital invested into the supply chain and reduce risk for the parties involved.[1]
A 2015 report suggested that SCF at that time had a potential global revenue pool of $20 billion.[1]
Reverse factoring differs from traditional factoring, where a supplier wants to finance its receivables by securing earlier receipt of funds from a third party. In 2011, the reverse factoring market was still very small, accounting for less than 3% of the factoring market.[citation needed] The technique has been used in wealth management schemes to defraud investors, for example by the second largest Chinese real estate company, Evergrande Group.[2]
