What is supply chain finance, and what is it not?

What it is

An anchor is a large company with many businesses that sell to it and many that buy from it. Supply chain finance lets a financier fund those businesses on the strength of their trade with the anchor (the invoice the anchor approved, the order it confirmed) rather than on the strength of each small business’s own accounts.

It runs in two directions. On the supply side you have delivered to the anchor and are waiting to be paid; the financing brings that payment forward. On the buy side you need stock from the anchor before you have the cash for it; the financing settles with the anchor so the stock can move, and you pay later. Each direction has its own products and its own obligations.

What it is not

It is not one product. There are several on each side, and they differ in who owes the money if something goes wrong. What a neighbor was told about their program may not be true of yours.

It is not simply “not a loan”. Whether you have borrowed depends on the product. On the buy side a conventional distributor facility is credit: you repay it on the agreed date whether or not the stock has sold. Our Sharia-compliant option is a Murabaha sale, not an interest-bearing loan. The financier, as Master Distributor, buys the goods from the supplier and sells them to you at an agreed profit. You pay the agreed price on the agreed dates. It is a binding obligation: if you pay late, recovery follows documented Sharia principles. On the supply side some products leave the obligation to repay with you and some place it with your anchor. The page for each product says which, from one source, and nothing else on this site retypes it.

It is not free. The cost is taken from the trade rather than invoiced to you, and under the documented terms you see every deduction before you accept. Taken from the trade is a payment mechanism, not a price of nothing.

It is not a way to finance a trade the anchor has not confirmed. The anchor’s confirmation (of the invoice, of the order) is what the financing rests on.

It is not certified by this platform. The platform operates the marketplace; the financier decides, and Shariah approval, where a financier offers it, is that financier’s own.

Why the side matters more than the product name

Products with similar names exist on both sides and mean different things. Decide which way you trade with your anchor first, then read the flow for that side: for suppliers, “How does getting paid early work?”; for distributors, “How does financing stock work?”. Each one draws the steps and states who carries the obligation.