Supply Chain Finance – A Guide for SMEs

Supply chain finance is one of the fastest-growing forms of financing globally. According to the Bank of Finland, the global SCF market grew 20% in 2025 and exceeded the USD 2 trillion mark. As an entrepreneur, I have followed this development with interest – supply chain finance offers significant opportunities for both large buyers and SME suppliers in Finland.

What is Supply Chain Finance?

Supply chain finance (SCF) is an umbrella term for financing solutions that optimize cash flow across the entire value chain. The basic idea is simple: a financier offers suppliers faster payment and buyers longer payment terms, using the buyer's better creditworthiness as the basis for financing.

Traditionally, each company in the supply chain optimizes its own cash flow separately, often leading to sub-optimization. Buyers extend payment terms, suppliers suffer from liquidity problems, and the efficiency of the entire chain declines. SCF solves this problem by providing financing that benefits all parties.

Forms of Supply Chain Finance

Reverse Factoring

Reverse factoring is the most common form of SCF. A large buyer sets up a financing program that suppliers can join. The process works as follows: the buyer approves the invoice, the financier pays the supplier ahead of schedule (e.g., within 5 days), and the buyer pays the financier on the original due date or with an extended payment term.

Dynamic Discounting

In dynamic discounting, the buyer offers suppliers the opportunity to receive early payment in exchange for a cash discount. The size of the discount depends on how early the payment is made. For example, a 2% discount 30 days before the due date corresponds to approximately 24% annual return for the buyer.

Purchase Invoice Financing

In purchase invoice financing, the finance company pays the company's purchase invoices to suppliers and the company pays the financier over a longer period. This is the simplest form of SCF and is especially suitable for SMEs that want to utilize cash discounts or extend cash flow cycles.

Supply Chain Finance in Finland

In Finland, the supply chain finance market is still developing compared to Central Europe and North America. The largest banks (Nordea, OP, Danske Bank) offer SCF programs for large companies. For SMEs, invoice financing and purchase invoice financing are practically the closest alternatives.

According to Finnvera's SME finance survey, 32% of SMEs find supplier payment management a challenge for cash flow. At the same time, Statistics Finland data shows that late payments raise the actual payment term for Finnish companies to 36 days from the nominal 26 days.

Benefits and Challenges of SCF

Implementing SCF in Practice

Implementing a supply chain finance program requires planning. In my experience, the most critical phase is engaging suppliers – without their participation, the program does not work.

Options for SMEs

Actual SCF programs are often a tool for large companies, but equivalent solutions exist for SMEs at a smaller scale.

"Supply chain finance is the financing model of the future that fundamentally changes inter-company financing. SMEs can benefit from this development through invoice financing and purchase invoice financing right now."

Summary

Supply chain finance optimizes cash flow across the entire value chain and benefits both buyers and suppliers. Reverse factoring, dynamic discounting and purchase invoice financing are the most important forms. In Finland, the market is growing, and SMEs can benefit from the development through invoice financing and purchase invoice financing.