Looks like the British have figured out that supply chain finance is a winning idea with the correct support. You might ask, “Who cares?” You should. Supply chain finance can lead to lower overall supply chain costs and lower costs to you as the consumer.
The idea of supply chain finance is that larger companies are less risky for banks and get lower interest rates. It’s best for the supply chain as a whole for the big company to pay the smaller companies quickly since they have a higher borrowing cost. However, the big company has an incentive to hold its cash until contractually obligated to make the payment. Supply chain finance shifts the payment responsibility from the big company to the small company so that the banks can offer better credit deals for the small partner. In doing so the costs in the supply chain are lowered.
Credit to Rick Soulas, a Penn State/Smeal College of Business student, for bringing this article to my attention.