Trade Finance, Payments and Working Capital

Every physical supply chain has a financial one running beside it, usually in the opposite direction and on a different clock. Goods leave a factory in Vietnam or Mexico weeks before they are sold in Ohio; someone has to fund the gap, and someone bears the risk that the buyer will not pay or the goods will not arrive. The instruments are old — letters of credit (governed today by the ICC's UCP 600, in force since 1 Jul 2007), documentary collections and open-account terms — and most trade between established partners now moves on open account (commonly cited at ~80% of world trade, verify), financed by the seller, the buyer, a bank or a platform in between. The modern growth area is supply-chain finance (SCF), above all payables finance or "reverse factoring": a bank or fintech pays a large buyer's suppliers early at a rate set by the buyer's credit, while the buyer pays the funder later. One industry report put global SCF volumes at ~$2.6tn in 2025 (+~7.5% y/y; BCR World Supply Chain Finance Report figure cited secondhand, verify; market-size estimates differ by a factor of a hundred depending on definition). SCF can be a fair trade of a strong buyer's credit for a weak supplier's cash — or a way to borrow without calling it debt. Greensill Capital collapsed on 8 Mar 2021 after its insurer declined to renew cover expiring 1 Mar 2021 and Credit Suisse froze ~$10bn of funds (Finance: Greensill Capital); Americanas, a Brazilian retailer, disclosed ~R$20bn of "accounting inconsistencies" in Jan 2023, much of it supplier-finance debt booked as payables (reclassification added ~R$15.6bn to gross debt, reported). In response, US GAAP now requires buyers to disclose supplier-finance programmes (FASB ASU 2022-04, for fiscal years beginning after 15 Dec 2022, with a rollforward a year later), and IFRS followed (IAS 7/IFRS 7 amendments, from 1 Jan 2024). Underneath sits the cash conversion cycle (CCC) — receivable days plus inventory days minus payable days — which explains why Dell, Amazon and Costco could grow on their suppliers' money and why a retailer stuck with 2022's excess inventory, or an importer paying 2025–26 tariffs at the border, needed more cash at once. This section covers the instruments, SCF and its accounting, dynamic discounting, carrier factoring and quick pay, the CCC, trade credit insurance, tariffs as a working-capital shock, and the failures. A worked example computes a stylized CCC and SCF programme from both sides, and a checklist reviews a programme before signing.