Supply chain finance is a process that links buyers, sellers, and financing institutions, allowing them to make business transactions between them in an easy, secure, and efficient manner. Supply chain financing helps businesses lower financing costs and improve their efficiency by providing loans that improve working capital for both the buyer and the seller.

Under supply chain financing, businesses sell their account receivables (unpaid invoices) to financing services providers or factoring companies (usually a bank), at a discount, thus getting access to cash before the buyer pays off the original invoice. This cash usually allows businesses to pay employees, suppliers, and reinvest in operations and growth.

How does supply chain financing work?

Why is supply chain finance so popular?

Supply chain and invoice financing have become very popular due to the safety and convenience it adds to major business transactions, which take place increasingly on a global scale.

On one hand, suppliers get immediate access to cash they can put into other investments, and on the other hand buyers can still take their time to pay for the goods or services received. The financing services providers also get a commission for their services, which makes it a win-win situation.

Supply chain financing costs and fees

Supply chain financing and invoice factoring fees depend on several factors such as the invoice value, the days financed, the creditworthiness of the buyer, and the length of the commercial relationship.

The supply chain financing process through invoice factoring happens in 2 stages. First, when a business sells an invoice, the financing company advances about 80% of the transaction minus fees. Then, once the buyer pays the invoice, the financing company gives the business the remaining 20% minus interests or transaction fees.

As a general rule, the longer it takes the buyer to pay, the higher the fees are.

We have a calculator you can use to get a rough estimate of the fees. Here is an example of how the fees are generally calculated:

Invoice value Days financed Today you will be advanced* At maturity of invoice you will receive the balance of
$10K 60 $7,800* $1,921
$50K 60 $39,000* $9,605
$100K 60 $78,000* $19,211
$300K 60 $234,000* $57,633
$500K 60 $390,000* $96,055

*Supply chain financing fees depend on several factors such as the invoice value, the days financed, the creditworthiness of the debtor, and the length of the commercial relationship.

 

Use Velotrade for supply chain financing

We are an internet-based supply chain and invoice financing platform that allows you to sell your outstanding invoices through its marketplace.

Velotrade is the alternative to bank financing. We have helped thousands of businesses (SME’s) financing their working capital needs in less than three days. Velotrade is regulated by the Securities and Futures Commission of Hong Kong, which maintains and promotes the fairness, efficiency, competitiveness, transparency, and orderliness of the securities and futures industry in Hong Kong.

While we are based in Hong Kong, we work with businesses all over the world and accept transactions in a variety of currencies. Some of the advantages of using Velotrade include:

  • Cash advance distributed within hours
  • Velotrade’s clients are not locked into a long term contract; we offer flexibility, allowing clients to fund only the invoices they want
  • Simple online sign up and verification process: Not separate ledger required
  • Multi-currency trading capabilities
  • Velotrade reaches a diversity of investors thus aims to accommodate 100% of the invoices
  • Fees are transparent and straightforward
  • Velotrade will not contact your buyers in application processing. Any contacts, if needed, will obtain your prior approval.

This is how you can apply for supply chain financing with Velotrade right now

If you are a registered company that’s been in business for 1 year generating turnover of over 1 million dollars (USD) and your client has a solid credit history and has been in business for at least 3 years generating turnover of over 20 million dollars (USD), then you can apply today!

Start the process now and get your SME on the right track! If you have any queries, you can contact our team online, or give us a call on +852 5808 3777.

Are you an investor?

With Velotrade, you can invest in high-yielding assets insured against default risk, without long-term capital commitment. Start building a diversified portfolio of receivables with low correlation to traditional asset classes today! Only debtors with genuine and verifiable existing relationships will be considered to join our online trading platform.

Apply as an investor