FAQ's
Q: What is Supply Chain Finance?
A: Supply Chain Finance (sometimes called Reverse Factoring or Payables Finance) is a buyer-sponsored invoice early payment program, with funding provided by a third party, typically a bank or Fintech company. When the buyer’s supplier requests early payment of an approved invoice, the third-party funder makes payment on the requested date, less a discount. The funder is paid in full by the buyer on the invoice payment date. Supply Chain Finance gives buyers the ability to help fund their suppliers’ accounts receivable, without affecting the buyer’s working capital.
Q: What is Digital Supply Chain Finance?
A: Digital Supply Chain Finance is the next generation of Supply Chain Finance, utilizing the seamless electronic integration between the buyer, supplier, and funder to provide invoices early the payment as quickly and efficiently as possible. Slow and cumbersome supplier onboarding, verification of invoices, and delivery of funds are all replaced by online systems, giving suppliers the fastest and most reliable access to early payment funding.
Q: How does Supply Chain Finance work?
A: When a buyer’s supplier requests early payment of an approved invoice, a third-party funder, engaged by the buyer, makes payment to the supplier on its requested date, less a discount. The funder is then paid the invoice amount by the buyer on the original invoice payment date.
Q: What is an Approved Invoice?
A: An Approved Invoice is a supplier’s invoice that has been approved and scheduled for payment by a buyer.
Q: Where can I get Supply Chain Finance?
A: Availability for any particular supplier depends on its buyer’s willingness to offer a program. Availability may also depend on the type of Supply Chain Finance the buyer offers. For example, bank-led Supply Chain Finance is usually available to investment-grade or near-investment-grade suppliers (but not smaller companies) due to bank risk requirements.
Q: Can all suppliers use a buyer’s Supply Chain Finance program?
A: It depends on who is providing funding for early payment. Bank-led Supply Chain Finance is usually available to investment-grade or near-investment grade suppliers (but not smaller companies) due to bank risk requirements. Some fintech Supply Chain Finance providers have added the ability to fund early payment to nearly all suppliers, including the long tail. Most of these funders require the buyer to guarantee payment of invoices that they fund. Recently new approaches have been introduced, like IFG’s Digital Supply Chain Finance solution, where the buyer
is not required to sign any guarantee.
Q: Can I get early payment of invoices if my customer doesn’t offer Dynamic Discounting or
Supply Chain Finance?
A: Yes. Dynamic Discounting and Supply Chain Finance are both buyer-led early payment solutions; that is, they are offered by the buyer itself. But if these programs aren’t available, a supplier can still seek early payment of an invoice through a supplier-driven solution like factoring or invoice discounting. In this case, the supplier would work directly with a third-party funder.
Q: What’s the difference between Supply Chain Finance and Invoice Finance?
A: Supply Chain Finance is a buyer-sponsored early payment program, with funding provided by a third party, typically a bank or fintech company. Invoice Finance is supplier-initiated early payment of invoices; that is, the supplier itself seeks funding of an invoice(s) from a third-party unrelated to the buyer.
Q: What’s the difference between Supply Chain Finance and Factoring?
A: Supply Chain Finance is a buyer-sponsored early payment program, with funding provided by a third party, typically a bank or fintech company. Factoring is supplier-initiated early payment of invoices, involving the sale of an entire book of receivables or group of selected invoices to a third party who then assumes responsibility for collection.
Q: What is Reverse Factoring?
A: Reverse factoring is another term for Supply Chain Finance, a buyer-sponsored invoice early payment program. It’s called reverse factoring because it’s an early payment solution initiated by the buyer for the benefit of the supplier, designed to help the supplier finance its receivables.
Q: Why do companies offer Supply Chain Finance to their suppliers?
A: Across industries, companies are extending payment terms. As large corporate buyers wait longer to be paid by their customers, they, in turn, increase their own terms — increasing the amount of time they take to pay suppliers. Supply Chain Finance can help reduce the pain to suppliers caused by extended terms. Supply Chain Finance provides an affordable way for suppliers to finance their invoices issued to buyers who offer it. In this way, the buyer can improve its working capital position and help to ensure the stability of its supply chain.
Q: What is Dynamic Discounting?
A: Dynamic Discounting is a form of early invoice payment to suppliers, provided by buyers.
The buyer pays its supplier early in exchange for a discount on the invoice amount. The
discount itself is “dynamic;” that is, it’s calculated daily based on how many days early the
invoice is paid.
Q: What are the benefits of Dynamic Discounting for a supplier?
A: For a supplier, dynamic discounting can provide an affordable form of short-term working
capital from the buyer itself. Compared to other sources of working capital like loans or bank
lines, this form of early payment is fast, usually hassle-free, digital, and does not require
repayment.
Q: What are the benefits of Dynamic Discounting for a buyer?
A: By deploying its excess capital to pay suppliers early, buyers can earn a discount on invoices
— thereby reducing their costs. Additionally, Dynamic Discounting can help to strengthen the
buyer’s supply chain by providing its suppliers with a source of working capital.
Q: Why doesn’t my customer offer Dynamic Discounting?
A: Not all buyers offer Dynamic Discounting to their suppliers, and many lack the technology to
do so. Among those that do, buyers don’t always have the capital to continuously fund their
Dynamic Discounting program. As a result, buyers may choose to target Dynamic Discounting
to only select suppliers, or for a limited period of time, or not offer it to any.
Q: Who is eligible for Dynamic Discounting?
A: Supplier eligibility for Dynamic Discounting is determined solely by the buyer. Some buyers
offer programs to all suppliers, some offer it to only a subset of suppliers, and some don’t offer
Dynamic Discounting at all. Also, availability may be sporadic, as buyers may not always have
excess cash to use for supplier early payment.
Q: Is Dynamic Discounting the same as 2/10 net 30?
A: No. 2/10 net 30 (and similar plans) refer to an offer by the supplier to accept a 2% discount
on the invoice if it’s paid within 10 days, with the entire invoice due in 30. Dynamic Discounting
differs in two key ways: First, it’s offered by the buyer to the supplier, not the other way
around. Second, the amount of the discount varies based on how many days early the invoice
is paid, which is why it’s called “Dynamic” Discounting.
Q: What is Invoice Finance?
A: Invoice Finance refers broadly to the practice of a supplier accelerating cash by selling
receivables or borrowing against them. In its simplest terms, it’s a way of being paid early for
invoices submitted to buyers. Funds are typically advanced by a bank or specialty finance
provider.
There are numerous different types of invoice finance, including factoring, invoice discounting,
and asset-based lending. What they all have in common is that the supplier gets cash right
away based on the value of outstanding invoices, and the funder is repaid when the invoice is
paid by the buyer. Funders purchase the supplier’s invoices at a discount or charge interest
against advanced funds if the arrangement is structured as a line of credit with a dynamic
borrowing base.
Q: Who provides Invoice Finance?
A: Invoice finance is usually provided by banks and specialty finance companies. Since the
the funder will advance funds to a supplier and wait to be repaid when the invoice is paid by a
buyer, it’s important for the funder to understand the quality of the invoice and its likelihood of
being paid in full.
Q: What is Factoring?
A: Factoring is a form of Invoice Finance that involves purchasing a supplier’s invoices at a
discount. This gives the supplier immediate access to cash in exchange for invoices that will be
paid in the future by its buyers. The funder, often called a factor, generally purchases an entire
portfolio of receivables from the supplier and assumes responsibility for the collection of invoices
from buyers.
Q: What is Asset-Based Lending?
A: Broadly, Asset-Based Lending refers to any loan secured by an asset like inventory and/or
accounts receivable. In the world of Invoice Finance, it refers specifically to a line of credit
secured by accounts receivable.
Q: What are the advantages of Invoice Finance?
A: Invoice Finance offers many advantages to companies seeking working capital. The process
is generally faster and easier than a traditional bank loan, and funds can be used for any
purpose — payroll, inventory, or for growing the business. In addition, Invoice Finance is
available to far more businesses than traditional bank loans or lines of credit.
Q: What is Select Invoice Finance?
A: Select Invoice Finance gives companies the ability to fund as few or as many invoices as they
wish — even just a single invoice. This lets suppliers utilize Invoice Finance only when needed,
with the possibility of seeking additional funds at a later time.
Q: What is Full Ledger Invoice Finance?
A: Full Ledger Invoice Finance refers to the practice of a funder who requires control of an
entire portfolio of invoices. While this is a comprehensive solution for suppliers, it requires the
supplier to make commitments to the funder including time commitment and monthly
minimum volumes.
Q: What is Open Ledger Invoice Finance?
A: Open Ledger Invoice Finance offers the advantages of Full Ledger Invoice Finance — including
the ability to fund an entire portfolio of invoices combine with the flexibility of Single/Select Invoice
Finance. Open Ledger Invoice Finance carries far fewer restrictions — no minimum funding
requirements, and no time commitments. Open Ledger Finance was pioneered by IFG and is
available to companies with revenues from $10 million to $1 billion.
How do I add users?
My Account > Users > Add New Contact
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My Account > Contacts > Add New Contact
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My Account > Officers, Owners, Directors, and Shareholders > Add
How do I change my IFG account’s email address?
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How long will it take to finance my first invoice(s)?
We can undertake initial funding within 48 hours of the first client contact – assuming the client completes all the required material in a timely manner
How long does it take to finance further invoices?
If the client chooses to offer further invoices the funding process is usually the same day
Are there any fees to start the finance process?
There are no application, “up-front”, or due diligence fees.
How do I submit financials using the client portal?
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How do I submit signed documents using the client portal?
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How do I submit reports using the client portal?
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How do I submit invoices using the client portal?
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How do I select My Reports in different currencies?
Reports > Currency Drop Menu > Select Currency
How do I select invoices in different currencies?
Invoices > Currency Drop Down Menu > Select Currency
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