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2018 | OriginalPaper | Chapter

2. Background I—What Is Buyer-Led Supply Chain Finance?

Authors : Erik Hofmann, Urs Magnus Strewe, Nicola Bosia

Published in: Supply Chain Finance and Blockchain Technology

Publisher: Springer International Publishing

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Abstract

SCF is a direct response to an evolving situation of the global trade conditions and offers an alternative solution for financing businesses, which generates liquidity and improves working capital. Instruments such as reverse factoring and reverse securitisation are a perfect example of a win-win situation between buyers, suppliers and banks. The principal barriers are represented by the burdens of KYC requirements and the accounting treatments.

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previous chapter Introduction—Why to Pay Attention on Blockchain-Driven Supply Chain Finance?

next chapter Background II—What Is Reverse Securitisation?

Working capital (WC) represents the amount of day-by-day operating liquidity available to a business and is calculated as: WC = (AR) + (Inv.) + (Cash) − (AP), where (AP) stands for accounts receivable, (Inv.) is the inventory value (raw material + Work in Progress (WIP) + finished goods), (AP) is accounts payables and (Cash) is self-explanatory.

A McKinsey study (2015) estimated that 10–15% of the SCF market now involves fin-techs, and their growth is likely to accelerate.

It is important to note that only eligible payables can be financed, submitted to a series of decisional constraints. For example, payables must be free from any liens or security interests and not have been previously pledged or sold (Alite Group 2014, p. 10).

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Title: Background I—What Is Buyer-Led Supply Chain Finance?
Authors: Erik Hofmann
Urs Magnus Strewe
Nicola Bosia
Publisher: Springer International Publishing
Book: Supply Chain Finance and Blockchain Technology
Print ISBN: 978-3-319-62370-2

Electronic ISBN: 978-3-319-62371-9

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-3-319-62371-9_2