supplier finance

Supply Chain Finance and Reverse Factoring for Contractors

Supply chain finance — also called reverse factoring — lets a financier pay a contractor's subcontractors and suppliers early at a small discount, while the contractor repays the financier later on standard terms. It can give subs faster cash and the general contractor a longer days-payable runway at the same time. But it carries an accounting and disclosure controversy that has drawn explicit attention from standard-setters, and construction's retainage and conditional payment clauses make it harder to deploy than it looks. Here is how it works and where it fits.