Supply chain financing lets suppliers get paid early on outstanding invoices, and lets buyers stretch out payment terms, without either side needing to put up collateral. In Singapore, Funding Societies runs this through its Accounts Receivable (AR) Financing product (for suppliers) and Accounts Payable (AP) Financing product (for buyers).

What is Supply Chain Financing?

Supply chain financing funds the sale and purchase of goods by optimising the cash flow in the supply chain for both buyers and sellers who are small and medium enterprises. It enables the buyer to stagger payments according to their financial position, and allows suppliers to get paid earlier than the typical 60 to 90-day payment terms.

A type of trade financing, Supply Chain Financing is often done through a financing partner, such as Funding Societies, who will first pay the suppliers and then collect back payment from the buyer at a later date.

As such, the supplier gets an early payment to facilitate a smooth flow of materials to the buyer, and the buyer gets payment terms that suit its financial position.

Is Supply Chain Financing Similar to a Business Term Loan?

Supply chain financing is not the same as a business term loan. A business term loan is a one-off loan, whereas supply chain financing uses a facility or line, thereby allowing the loan to be used, repaid, and reused. Supply chain financing also offers SMEs flexibility to access funding in accordance with increased sales transactions instead of being limited to one specific amount.

While business term loans are usually for general business use such as business expansions or day-to-day operations, supply chain financing involves the financing of specific sale of goods or transactions in the supply chain. Supply chain financing also tends to have a shorter tenor and bullet repayments, as opposed to a term loan’s comparatively longer tenor and installments.

Supplier Financing vs Buyer Financing at a glance

Criteria | Supplier Financing (AR Financing) | Buyer Financing (AP Financing) Who applies | The supplier, seeking early payment | The buyer, seeking extended payment terms Credit line | Up to S$1 million | Up to S$500,000 Financing amount | Up to 90% of the invoice value | Full invoice amount paid to the supplier on the buyer’s behalf Tenor | 30 to 120 days | Up to 90 days Minimum operating history | 6 months | More than 12 months Collateral required | None — eligibility runs on shareholding and operating history | None — same basis

A Common Scenario: Bridging Both Ends of The Payment Gap

The following is an illustrative, composite scenario reflecting a pattern we see often — not a real client case. An SME manufacturer extends 60-day terms to a large retail buyer, but its own raw material supplier requires payment within 14 days. When a big order comes in, the SME uses Supplier Financing to pay the supplier early and keep production on schedule — but the buyer still pays on its usual 60-day cycle. Without financing to bridge that gap, the SME would be carrying the cost of the paid-out invoice for over six weeks before any cash comes back in. This is exactly the mismatch Buyer Financing (or a combined ARF/APF facility) is built to solve — the SME draws down against the buyer’s invoice instead of waiting out the full term, so working capital isn’t locked up on either side of the transaction at once.

The Supply Chain Finance Process

There are two main types of supply chain financing: Supplier Financing and Buyer Financing. Each has a slightly different process.

The Benefits of Supplier Financing and How It Works

Rather than waiting for customers (buyers) to pay invoices on time with lengthy payment terms, the supplier can submit invoices to financial institutions for early payment. By having more liquidity, suppliers will be able to operate their business without much disruption.

By tapping on Supplier Financing, the supplier can receive payment early and use the funds to optimise its working capital while the buyer maintains their existing payment procedure without disruption. This is suitable for SMEs with a steady stream of recurring invoices, rather than a one-off transaction.

To better illustrate the process, refer to the Supplier Financing process by Funding Societies below:

Process for Supplier Financing

  1. The Supplier sells goods and sends the invoice to the Buyer;
  2. SME (Supplier) then submits copies of the invoices to Funding Societies before the invoice due date;
  3. Funding Societies pays the Supplier the invoice amount minus financing fees, on behalf of the Buyer;
  4. Buyer then pays Funding Societies the invoice payable amount on the invoice due date;

The Benefits of Buyer Financing and How it Works

Buyer Financing allows buyers to pay their invoices at a later date, essentially getting an extended credit term without impacting the supplier’s cash flow. Instead of worrying about paying the supplier and a lack of cash flow, buyers can submit a request for the financing partner to pay the suppliers first and the buyer can then pay back the financing partner at a later time.

By using Buyer Financing, the buyer can optimise their working capital with a longer time for payment while the supplier can receive payment early and ensure consistent supply to the buyer.

The process for Buyer Financing by Funding Societies is as follows:

Process for Buyer Financing

  1. Supplier, SME will deliver the goods and send invoice to the buyer;
  2. SME (Buyer) will send a payment request to Funding Societies;
  3. Funding Societies makes full payment to the supplier on behalf of the Buyer;
  4. Funding Societies will collect payment from the SME (Buyer) on the financing due date.

Frequently asked questions

Does supply chain financing require collateral?

No. Neither Supplier Financing (AR Financing) nor Buyer Financing (AP Financing) requires physical collateral to be pledged. Eligibility instead runs on shareholding (at least 30% held by a Singapore Citizen or PR for AR Financing) and operating history (6 months for AR Financing, more than 12 months for AP Financing).

Is supply chain financing suitable for SMEs?

Yes, particularly for SMEs with a steady, recurring stream of invoices rather than a one-off transaction. It suits both a supplier waiting on lengthy payment terms and a buyer who needs to stagger payments without straining a supplier relationship.

Is funding guaranteed in supply chain finance programs?

No. As with all Funding Societies financing, every application is subject to underwriting guidelines and credit approval — funding is never guaranteed simply by applying. Approval depends on the applicant’s credit profile, invoice quality, and the eligibility criteria above.

If you’re ready to explore supply chain financing, Funding Societies offers Accounts Receivable Financing for suppliers and Accounts Payable Financing for buyers.

Apply for Accounts Receivable Financing to get paid early on your invoices, or explore Accounts Payable Financing to extend your payment terms.

Disclaimer

Funding Societies Pte Ltd is a crowdfunding platform licensed by the Monetary Authority of Singapore. The products offered by Funding Societies are governed by the Securities and Futures Act (SFA) and shall be construed and understood as a debt security regardless of the references to “loan”, “lending”, “finance” or “financing”. All third party trademarks product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them. View Funding Societies disclaimer notice here. The above article was published on 9 February 2021 and updated in 2026. It is accurate as of date of publication.

Dorcas Pang
Latest posts by Dorcas Pang (see all)