Payables finance (approved payables, reverse factoring)

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A buyer approves your invoice, and a finance provider pays you early. The cost depends on how safe the buyer is.

October 1, 2026 · Reference card

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01 · In plain words

The buyer approves your invoice, and a finance provider can pay you before the due date

Payables finance is a program that a buyer sets up for its suppliers. Once the buyer approves a supplier's invoice, the supplier can sell that invoice to a finance provider and get paid early (Global Supply Chain Finance Forum). Other names for it include approved payables finance, reverse factoring, confirming and supplier finance.

Selling the invoice is a choice. The supplier can wait and get the full amount on the due date. Or it can take the money early, less a discount, which is the finance provider's charge (GSCFF).

The finance provider looks at the buyer's strength, because the buyer is the one who will pay. So the cost is typically based on the buyer's credit risk, the chance that the buyer fails to pay (GSCFF Standard Definitions, 2016). The buyer still pays the full invoice on the original due date (GSCFF).

Who is involved

• The buyer (the importer, in cross-border trade) sets up the program and approves invoices. Its promise to pay an approved invoice has no conditions and cannot be taken back.
• The supplier (the exporter, in cross-border trade) decides invoice by invoice whether to sell for early payment.
• The finance provider, such as a bank, buys approved invoices and pays the supplier early. It relies on the buyer's creditworthiness.

02 · How it works

Eight steps take an invoice from the program setup to the buyer's payment on the due date

Figure 1 · Interactive

Payables finance, step by step

Read down the steps. The last step is where the buyer pays the full invoice.

Sources: Global Supply Chain Finance Forum, Payables Finance; GSCFF Standard Definitions for Techniques of Supply Chain Finance, 2016.

03 · What it means for you

The supplier gets the option of early cash at the buyer's credit cost, and the buyer keeps its original payment date

Figure 2 · Interactive

What payables finance means for each side

Choose your side of the trade.

04 · Worked example

Paid 60 days early on a $1 million approved invoice, the supplier receives $990,833.33

This example uses round, made-up numbers. The buyer approves a $1,000,000 invoice on 90-day terms. The supplier sells it on day 30, so the finance provider pays 60 days early. The rate is 5.50% a year (a 4.00% market rate plus the bank's 1.50% margin). Banks count a year as 360 days for this. Real rates depend on the buyer's credit and the provider.

Figure 3 · Illustrative

Early payment on a $1,000,000 approved invoice

Illustrative inputs. The supplier's early payment is highlighted.

Made-up rates, worked out by our checking script (payables-finance-discount.py). Your costs will differ by buyer, provider and deal.

05 · When to use it

When payables finance fits

Good fit when

• The buyer's credit is stronger than its suppliers', since the cost follows the buyer's credit risk (GSCFF).
• The buyer can approve invoices early, with no conditions. That approval is what starts the finance (GSCFF).
• As the supplier, you want the choice of early payment on each invoice, without having to take it.

Another tool may suit better when

• The buyer cannot approve invoices early and with no conditions. As the supplier, look at factoring or invoice discounting, which you arrange yourself.
• The buyer would rather pay early from its own cash in return for a discount. Look at dynamic discounting. See Dynamic discounting.
• You sell on simple credit terms with no program behind them. See open account.

06 · Rules and a real case

Market definitions describe payables finance, and a large company's filing shows a program at work

Each payables finance program runs on its own signed agreements. The market uses the Standard Definitions for Techniques of Supply Chain Finance, published in 2016 by a group of five banking and trade bodies (GSCFF). BAFT has also published Payables Finance Principles (September 2020) and Market Practices (November 2020).

A real case. In its annual report (Form 10-K) for the fiscal year ended June 30, 2026, filed on August 4, 2026, The Procter & Gamble Company (P&G) describes a supply chain finance program with several global financial institutions. Suppliers agree the sale of their invoices directly with the banks. The banks let suppliers use P&G's credit strength when they set the cost. P&G says: "The Company is not party to those agreements." It also says it "does not provide any form of guarantee under these financing arrangements." P&G states that payment terms for suppliers in the program generally range from 60 to 180 days (P&G 10-K, supplier finance note). At June 30, 2026, confirmed supplier invoices not yet paid under the program came to $6,176 million (P&G 10-K, rollforward table).

Summary

Payables finance lets suppliers get paid early on approved invoices, at a cost based on the buyer's credit

The buyer sets up the program and approves invoices. The supplier chooses, invoice by invoice, whether to sell for early payment, less a discount. The buyer pays the full amount on the original due date. The key step is the buyer's approval, so it pays to settle any question about the goods before the invoice is approved.

Related guides: Payables finance; Extending terms, keeping suppliers strong; Dynamic discounting; Receivables finance. Related cards: Dynamic discounting; Factoring; Open account. Every term is in the Trade Finance Glossary.

Sources

1. Global Supply Chain Finance Forum, Payables Finance (technique page), October 31, 2024. Supports: definition, other names, the parties, the flow, the buyer's approval as trigger, the supplier's choice, recourse
2. Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance (ICC-hosted PDF), 2016. Supports: cost aligned with the buyer's credit risk, the payable stays due until its due date
3. Global Supply Chain Finance Forum, Standard Definitions page, 2016. Supports: the market definitions and the bodies behind them
4. BAFT (Bankers Association for Finance and Trade), Industry Definitions and Guidelines, November 2020. Supports: Payables Finance Principles and Market Practices
5. The Procter & Gamble Company, via SEC EDGAR, Form 10-K FY2026, Note: Supplier Finance Programs, August 4, 2026. Supports: the real case: program, no party to supplier agreements, no guarantee, 60 to 180 day terms
6. The Procter & Gamble Company, via SEC EDGAR, Form 10-K FY2026, Supplier Finance Programs, Rollforward (Details), August 4, 2026. Supports: the real case: $6,176 million outstanding at June 30, 2026
7. Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: the 360-day year used in the worked example

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