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Glossary
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Payables financing

What is payables financing?

Payables financing, also known as supplier finance or reverse factoring, is a financial solution that allows businesses to extend their payment terms with suppliers while providing suppliers with the option to get paid early. It can be a valuable cash flow management tool for businesses.

In a payables financing arrangement, a financial institution pays the supplier invoices on behalf of the buying company, allowing the company to defer payment until a later date. Meanwhile, the supplier has the option to receive immediate payment from the financial institution for a fee. This setup can benefit both parties: it improves the buyer's cash flow by extending payment terms, and it reduces the supplier's risk of late payment and improves their cash conversion cycle.

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