Procurement Finance for the Small and Medium-Sized Enterprises

Abstract

Procurement finance provides many benefits in helping in the resolution of small and medium-sized enterprises (SMEs) financing, essentially connected with the difficulties in accessing to the credit from the financial institutions. First, it has more flexibility. With the aid of supply chain strength, upstream and downstream enterprises on respect to the customer business can use the flexibility of financing strategy, inherent to procurement finance, to obtain various forms of financial support. Second, procurement finance helps in getting direct financing, for instance within the same ecosystem composed of SMEs, financial institutions, and third-party logistics operators. Third, it is easy to carry our folk financing (private lending) since the supply chain provides an information sharing platform for financial institutions and SMEs. This helps in solving the problem of information asymmetry between financiers and enterprises.