Insights · Analysis · for financiers
Underwriting the trade, not the balance sheet
Supply chain finance asks a credit team a second question: will the trade itself pay? Answering it well takes different habits, not only a new product sheet.
Mtaji Insights
Published 31 October 2026. 2 min read.
Written by the Mtaji Insights desk and checked against Mtaji’s product terms and publication rules before release. Editorial standards
In brief
- In supply chain finance the trade carries part of the credit decision, and how much depends on the structure.
- Dilution, duplicate documents, performance risk and concentration do not appear in annual accounts. They appear in the trading record.
- Write credit policy for each structure first, then train the team against it.
A credit team trained on balance sheets asks whether a business can repay from its own resources. Supply chain finance adds a second question, and in some structures puts it first: will the trade itself pay?
A different question at the credit committee
In conventional lending, the borrower’s accounts, collateral and bureau history carry most of the decision. In supply chain finance, the transaction carries part of it: an invoice the anchor has approved, an order it has confirmed, a distributor it has supplied for years. The credit officer has to judge how much of the risk the trade really removes, and that depends on the structure.
Start with who carries the obligation
Under reverse factoring, the anchor settles with the financier on the due date, so the analysis centers on the anchor and on whether the approved invoice is valid. Under invoice discounting and purchase order financing, the supplier carries the obligation with full recourse, so its own capacity still matters, and the anchor’s confirmation strengthens the case rather than settling it. Distributor finance is a credit facility to the distributor, with recourse to the distributor, repaid on the agreed date whether or not the stock has sold. A team that treats these as one product will misprice some of them.
Risks a balance sheet review will not surface
Trade-based credit has its own failure points. Dilution: credit notes, returns and disputes that reduce what the anchor actually pays against an approved invoice. Duplicate or fictitious documents: the same invoice offered twice, or an order that never existed. Performance risk: under purchase order financing the goods are not yet made, and a supplier that cannot deliver is not paid. Concentration: a book built on one anchor rises and falls with it. And on the distribution side, stock that sells more slowly than planned, which does not move the date the distributor repays.
None of these appears in a set of annual accounts. All of them appear in the trading record, for a team that knows to look.
Policy before training
The instinct is to answer a new product with a course. The better order runs the other way. First, decide which structures the institution will offer, with which anchors, and who carries the obligation in each. Then write credit policy for each structure: the evidence required, how dilution and concentration are limited, and when a confirmation is enough and when it is not. Then train the team against that policy, on real program files.
Where the anchor’s record helps, and where it does not
A long trading history with an anchor is strong evidence of reliability. It is not evidence of everything. It says little about a supplier’s other customers, or a distributor’s stock in a slow season. The M-Score reads that record and the public record of the business, explains what it measures, and leaves the decision with the financier. The credit officer’s judgment remains the part that cannot be delegated.