Unlike traditional methods of managing buyer/supplier relationships that merely defer pain to one side or another, Supply Chain Finance employs a collaborative financing model where the lending agreement exists between the lender and the buyer. The terms and lending rates are therefore much more favorable because they are based on the credit rating of the buyer, and can then be utilized on-demand by the supplier as needed. This type of arrangement is known as reverse factoring.

In this scenario, the supplier can opt-in to the early payment program and begin receiving automated, early invoice payments electronically on Day 10 rather than Day 60, for example. Unlike traditional factoring, the terms and rates are better (because they are based on the credit/risk rating of the larger entity), and there is just one service fee for early payments.

Meanwhile, the corporate buyer now has the added benefit of being able to extend payment term lengths if they so choose. By extending days payable outstanding, they are increasing their on-hand liquidity and improving working capital.