The Role of Reverse Factoring in Supply Chain Finance and Business Resilience
Reverse factoring is a kind of supplier finance solution that organizations use to provide advance payments to their suppliers on the basis of approved invoices. In a reverse factoring program, suppliers have the ability to request early payment on invoices from a bank or financial institution, while the buyer settles the payment with the financier on the invoice maturity date. This arrangement helps buyers enhance supply chain stability, strengthen supplier relationships, and optimize their working capital. This financial method, commonly known as supply chain finance, is sometimes used as a broader term covering various supplier financing solutions. Unlike traditional factoring, where a company sells invoices at a discount to a factor that collects customer payments, reverse factoring allows suppliers to receive early payments from a financial institution, with buyers settling invoices at maturity. This approach enhances cash flow management and strengthens supply chain relationships...