Trade and Supply Chain Finance Program (TSCFP)

Pre-shipment Finance

Pre-shipment financing is a short-term commercial finance option that provides capital to pay suppliers upfront for verified purchase orders. Businesses avoid depleting cash reserves or declining an order because of cash flow challenges. It allows suppliers to accept unusually large orders and adjust the loan basis up/down quickly to meet needs. If order volume drops, there is no long-term commitment so they can stop using it at any time. ADB’s Pre-shipment Financing is tied to a post-shipment, post-acceptance Payables Finance Program offered by the PFI to the Anchor.

Key Benefits

For the distributor:

• Finance raised against a strong credit rating with lower implied cost of funding.
• Working capital optimization with improved cash flow forecasting and flexibility.
• Alternative sources of funding with reduced use of credit availability from traditional banking sources.
• Ability to manage significantly longer payment terms imposed by financially strong buyers.
• Suppliers get additional working capital for the production and the purchase of raw materials.
• Ability to obtain finance for the fulfilment of an order from a buyer when other forms of finance are financially less attractive or not available.
• Improved cash flow forecasting and flexibility

For the Anchor:

• Greater supply chain stability as the financing of the suppliers is covered.
• Extension of payment terms by providing finance at the normal maturity of the invoices.
• Cuts the cost of processing and reconciling supplier payments
• Ensuring supply from the seller without committing its own financial resources.
• Cost reduction as involvement of the Anchor can result in better financing rates from PFIs.

Post-shipment Post-acceptance Finance / Payables Finance / Supplier Finance

Post-Shipment Supplier Finance is the provision of funds to the supplier upon the delivery and acceptance of goods by the Anchor. The product is meant to finance sales receivable from the shipment of goods to the realization of the transaction. Under this product, the main risk is the repayment/credit risk of the buyer (Anchor). ADB’s credit risk assessment focuses on the Buyer.

Key Benefits

For the distributor:

• Finance raised against a strong credit rating with lower implied cost of funding.
• Working capital optimization with improved cash flow forecasting and flexibility.
• Alternative sources of funding with reduced use of credit availability from traditional banking sources.
• Ability to manage significantly longer payment terms imposed by financially strong buyers.
• Suppliers get additional working capital for the production and the purchase of raw materials.
• Ability to obtain finance for the fulfilment of an order from a buyer when other forms of finance are financially less attractive or not available.
• Improved cash flow forecasting and flexibility

For the Anchor:

• Greater supply chain stability as the financing of the suppliers is covered.
• Extension of payment terms by providing finance at the normal maturity of the invoices.
• Cuts the cost of processing and reconciling supplier payments
• Ensuring supply from the seller without committing its own financial resources.
• Cost reduction as involvement of the Anchor can result in better financing rates from PFIs.

Distributor Finance (DF)

Distributor Finance is the provision of financing for distributors of large corporates (Anchor) to cover the holding of goods for re-sale and to bridge the liquidity gap until the receipt of funds from receivables following the sale of goods to a retailer or end-customer.

Key Benefits

For the distributor:

• Working capital optimization permitting the distributor to bridge the liquidity gap between the purchase of inventory and payments received from its customers.
• Increased credit for distributors based on the existence of actual financial or commercial support from the Anchor.
• Credit for distributors at a lower cost than what would be available from traditional banking sources.

For the Anchor:

• Sales growth (by providing additional finance to increase product availability through distributors, the finance of inventory and support for the prompt delivery of products).
• Provide extended credit terms to the distributor or to ensure that additional funding can be raised with its support.