Solutions
Supplier finance
A programme the anchor buyer sets up, so its suppliers are paid early against the buyer's credit strength while the buyer keeps to the agreed terms.
Definition
What it is
Supplier finance, also called reverse factoring, starts with the buyer rather than the supplier. The buyer approves invoices as usual, and the supplier then chooses to receive the value early against a discount calculated on the remaining days.
The substantive difference is that pricing is built on the large buyer's credit standing, which is usually far better than a small supplier's. The result is a lower cost for the supplier, stable payment terms for the buyer, and a supply chain less exposed to distress.
Mechanics
How it works
Who
The buyer
What
Approves invoices due to its suppliers and uploads them to the programme
When
Within its usual approval cycle
Who
The supplier
What
Sees the approved invoices and the cost, and picks which ones to take early
When
Any time before the due date
Who
Fkah
What
Pays the supplier the invoice value less the discount for the remaining days
When
Within the programme's agreed payment cycle
Who
The buyer
What
Settles the full invoice value on the original due date
When
On the due date, unchanged
Two sides, and what each one gains
The programme only works if both sides gain. If one wins at the other's expense, it collapses within two cycles.
From the anchor buyer's side
Hold or extend your payment terms by agreement and improve working capital, without your suppliers paying for it.
- An effect on days payable outstanding and working capital
- A supply chain less exposed to a supplier's cash squeeze
- Better negotiating position on purchase prices
- A dashboard for supplier enrolment and utilisation
From the supplier's side
Receive the value of your approved invoice early at a cost built on your buyer's strength, usually below your alternatives.
- Pricing built on the buyer's credit standing
- No property collateral and no equity
- Invoice-by-invoice choice, with no standing commitment
- Digital enrolment with no change to your commercial relationship
Fit
Who it suits
- Anchor buyers with programmable annual supplier spend — the programme is designed around SAR 100M and above, with final thresholds announced at launch
- Buyers with a disciplined invoice approval cycle and an ERP that can be connected
- The suppliers of those buyers, small or mid-sized
- Sectors with a wide supplier base: retail, manufacturing, contracting and healthcare
Cost
What it costs
In this product the supplier normally carries the discount for the remaining days, calculated on the buyer's credit standing. The cost of running the programme itself is agreed with the buyer before launch.
Priced per transaction, with no sign-up fee and no monthly fee. Four things move the price: the buyer's strength, the tenor, the size of the amount, and the track record behind it. The cost is shown in full before you confirm, and Fkah's own rates will be published at launch.
How supply chain finance is pricedQuestions about this product
How is it different from receivables finance?
Does the programme affect how the buyer's debt is classified?
Does every supplier have to join?
How long does a programme take to launch?
Next step
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