Supply chain finance (reverse factoring)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

Supply chain finance, or reverse factoring, is a programme a large buyer sets up with a financier so that its suppliers can be paid early, at a discount priced on the buyer's credit, while the buyer pays the financier on the invoice's due date, often extended. To the buyer's lender it is borrowing that looks like trade creditors: creditor days rise and operating cash flow improves once, but if the programme is withdrawn the payables fall back and the cash goes out within weeks. IFRS accounts for years beginning on or after 1 January 2024 disclose these arrangements, showing a lender how much of the creditor balance depends on one.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.