Trade finance protects a shipment, supply chain finance frees the working capital around it
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Ossiano Guides · Foundations of trade finance
Both put cash in a seller's hands earlier, but trade finance is defined by the risks of an international sale while supply chain finance is defined by the working capital tied up across a buyer's or seller's supply chain.
Terms like this have a quick explainer. Tap or hover on them.
01 · Definitions
Industry bodies separate the two by purpose: trade risk or working capital
The US International Trade Administration's Trade Finance Guide defines as a set of techniques and financial instruments that reduce the risks of international trade, securing payment for exporters and delivery of goods and services for importers. Our guide What is trade finance? covers the full toolkit.
has its own master definition: the use of financing and risk mitigation techniques to optimize the and liquidity invested in supply chain processes and transactions. It comes from the Standard Definitions for Techniques of Supply Chain Finance, published in 2016 by the Global Supply Chain Finance Forum (GSCFF) of five associations: BAFT, EBA, FCI, ICC and ITFA. The ICC describes the definitions as a living document that will require periodic updating.
The GSCFF groups its techniques in two families. covers techniques in which sellers obtain financing by selling all or part of their receivables. Loans or advances cover the others, from loans against receivables or inventory to distributor and pre-shipment finance, according to the forum's techniques index.
02 · Trigger
Trade finance starts with a sale; payables finance starts with an approved invoice
A starts when the importer applies to a local bank, which evaluates the importer's creditworthiness, in the ITA's illustrated steps. Our guide to letters of credit and the sight letter of credit card walk through each step.
, also called , starts with the buyer. The buyer usually establishes a program with one or more finance providers for all or a subset of its suppliers, and the key trigger for finance is the buyer's unconditional approval of the invoice for payment, the GSCFF says. The buyer identifies the payables for which it has given an unconditional, irrevocable commitment to pay, an . Our guide to payables finance goes further.
"The payable continues to be due by the Buyer until its due date."
Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance, 2016, page 9
Figure 1 · Interactive
Three ways a seller gets paid early
Tap a technique to follow it from set-up to settlement. The step marked "Credit check" is where the credit decision is made.
Sources: US International Trade Administration, Trade Finance Guide, 2022 edition; Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance.
03 · Whose credit
Payables finance prices off the anchor buyer's credit
Payables finance gives the seller early, discounted payment, typically at a financing cost aligned with the credit risk of the buyer, the GSCFF's 2016 Standard Definitions state. The finance provider relies on the buyer's creditworthiness and typically finances without to the seller, though certain elements of recourse are retained, such as for breaches of representations and warranties. Financing of 100 percent less a financing discount is the norm, according to the GSCFF.
The buyer at the center is the , a party whose commercial and financial strength anchors the program. Procter & Gamble describes the arrangement in its fiscal 2026 Form 10-K: the company is not party to the agreements between its suppliers and the banks, and the banks allow suppliers to use P&G's creditworthiness in setting spreads. P&G's supplier payment terms generally range from 60 to 180 days.
Figure 2
Side by side: who starts it, whose credit counts
Read across a row to compare a letter of credit, payables finance and receivables discounting.
Sources: US International Trade Administration, Trade Finance Guide, 2022 edition; Global Supply Chain Finance Forum, Standard Definitions, 2016 and 2024 update pages; ICC UCP 600.
Figure 3 · Try it
Two questions, two costs
Pick a technique. Payables finance answers "what does early cash on an approved invoice cost the supplier?"; a letter of credit answers "what do the bank undertakings and usance funding cost?". Each result answers its own question, so read them separately.
Technique
Payables finance: early payment day on a 90-day approved invoice
Letter of credit: usance days (LC valid 180 days)
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Our Research Desk used simple interest on the US money market day count (Actual/360). Payables finance: discount = invoice x (base rate 4.00% + margin 1.50%) x days from early payment to the day-90 due date / 360; net proceeds = invoice minus discount. Letter of credit: issuance fee 0.25% and confirmation fee 0.15% of face value per 90-day period over the 180-day validity, plus usance interest at 6.00% x face value x usance days / 360, plus US$500 of flat charges. All rates and fees are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Actual cost varies with the buyer's and banks' credit, the program or credit terms, market rates and the fees each bank charges.
04 · Disclosure
Buyers now disclose supplier finance programs under US and international standards
In the US, requires a buyer in a to disclose the key terms of the program in each annual reporting period. The FASB update applies to fiscal years beginning after December 15, 2022, with the rollforward of confirmed amounts applying to fiscal years beginning after December 15, 2023. FASB states that the amendments do not affect the recognition, measurement or financial statement presentation of supplier finance obligations.
Under IFRS, the IASB issued supplier finance amendments to IAS 7 and IFRS 7 on May 25, 2023, effective for annual reporting periods beginning on or after January 1, 2024, according to the IFRS Foundation.
The disclosures make programs visible. P&G reports its confirmed supplier finance obligations within accounts payable in its fiscal 2026 Form 10-K. Its rollforward shows US$18,110 million of invoices confirmed and US$17,741 million of confirmed invoices paid in fiscal 2026, leaving US$6,176 million outstanding at June 30, 2026, against US$5,790 million a year earlier. The fiscal 2025 filing reported US$5,559 million at June 30, 2024, in SEC EDGAR data.
Figure 4 · Interactive
One program in the accounts: P&G supplier finance, fiscal 2024 to 2026
Tap or hover on a bar for its value. The first three bars are year-end balances; the last two show fiscal 2026 invoices confirmed and paid.
Source: The Procter & Gamble Company, Form 10-K filings for fiscal 2025 (filed August 4, 2025) and fiscal 2026 (filed August 4, 2026), supplier finance program disclosures via SEC EDGAR.
05 · Overlap
Receivables techniques sit in both families
Some techniques serve a seller whether the sale is domestic or cross-border. is the sale of individual or multiple receivables to a finance provider at a discount, the GSCFF says; the parties are the seller and the finance provider, and the buyer is not a party but is relied on for payment. In , sellers sell their invoices at a discount to a finance provider, and the buyer is not a party to the agreement, according to the forum's factoring page.
Factoring is large: world volume reached EUR 4.04 trillion in 2025, according to the FCI Annual Review 2026. The families also hand off to each other. Upon shipment, a finance provider that funded production may offer such as receivables discounting or payables finance, the GSCFF's pre-shipment finance definition notes. Our guides to receivables finance and factoring vs invoice discounting go further, as do the factoring and invoice discounting instrument cards.
06 · Market size
Published supply chain finance volumes rest on industry estimates
Supply chain finance volume figures in circulation trace to industry estimates relayed by FCI. Its 2021 press release states that its figures are based on industry estimates provided by senior executive practitioners. Our Research Desk found no official statistical series for supply chain finance volume, so this guide does not quote one.
Adjacent markets can be sized instead: FCI's factoring volumes, and company disclosures under ASU 2022-04 such as P&G's. Development lenders are active too. The IFC announced on June 23, 2026 a facility with Banco Santander covering up to US$500 million of supply chain finance assets, expected to support about US$1.5 billion of transactions over three years.
07 · Ossiano view
The two families answer different questions for a CFO
OBSERVATION 01
The credit that counts differs
A letter of credit begins with the importer's bank assessing the importer; payables finance is priced on the buyer's credit risk for the supplier's benefit. The choice turns on whose balance sheet carries the trade.
OBSERVATION 02
Disclosure has made programs visible
P&G reported US$6,176 million of confirmed supplier finance obligations at June 30, 2026, disclosed under ASU 2022-04. Investors can now track program use year by year.
OBSERVATION 03
The vocabulary is standardized
Five industry associations issued the Standard Definitions in 2016, and ICC treats them as a living document. Our guides use those definitions throughout.
Summary
Trade finance protects the sale; supply chain finance frees the working capital
Trade finance is a set of techniques that reduce the risks of international trade. Supply chain finance uses financing and risk mitigation techniques to optimize the working capital invested in supply chain processes. Payables finance, its best-known form, is a buyer-led program in which suppliers sell receivables the buyer has approved, typically at a cost aligned with the buyer's credit risk. A letter of credit instead starts with the importer's bank evaluating the importer.
US buyers have disclosed supplier finance programs under ASU 2022-04 since fiscal years beginning after December 15, 2022, and IFRS reporters under the IAS 7 and IFRS 7 amendments since January 1, 2024.
Related guides: What is trade finance?; Trade Finance Glossary; Receivables finance; Factoring vs invoice discounting; Payables finance; Extending terms, keeping suppliers strong; Dynamic discounting; Letters of credit.
Instrument cards: Payables finance; Invoice discounting; Factoring; Dynamic discounting; Letter of credit (sight).
For questions on how these shifts affect existing or planned trade finance exposures, contact the Ossiano Research Desk.
Sources
- FCI, FCI Annual Review 2026, 2026. Supports: world factoring volume of EUR 4.04 trillion in 2025.
- The Procter & Gamble Company, via SEC EDGAR, Form 10-K FY2026, Supplier Finance Programs, Rollforward (Details), R98, August 4, 2026. Supports: confirmed obligations of US$6,176 million at end of year and US$5,790 million at beginning of year; invoices confirmed US$18,110 million and paid US$17,741 million in fiscal 2026.
- The Procter & Gamble Company, via SEC EDGAR, Form 10-K FY2026, Note: Supplier Finance Programs, R24, August 4, 2026. Supports: P&G not party to supplier-bank agreements; banks let suppliers use P&G's creditworthiness in setting spreads; payment terms of 60 to 180 days.
- The Procter & Gamble Company, via SEC EDGAR, Form 10-K FY2026, Supplier Finance Programs, Additional Information (Details), R97, August 4, 2026. Supports: obligations reported within accounts payable.
- The Procter & Gamble Company, via SEC EDGAR, SEC XBRL companyconcept, SupplierFinanceProgramObligation, CIK 0000080424, August 4, 2025. Supports: obligations of US$5,559 million at June 30, 2024 (fiscal 2025 Form 10-K).
- Financial Accounting Standards Board, Accounting Standards Update No. 2022-04, September 2022. Supports: effective dates for fiscal years beginning after December 15, 2022 and, for the rollforward, December 15, 2023; key terms disclosure; scope limited to disclosure.
- IFRS Foundation, IASB increases transparency of companies' supplier finance, May 25, 2023. Supports: IAS 7 and IFRS 7 amendments issued May 25, 2023, effective January 1, 2024.
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), July 2022. Supports: definition of trade finance (page 2); the illustrated LC steps, including the bank's evaluation of the importer (Chapter 4).
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance, March 2016. Supports: master definition of supply chain finance (page 8); anchor (page 24); receivables purchase (page 27).
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance (ICC-hosted PDF), 2016. Supports: payables finance cost aligned with buyer credit risk (page 45); the payable continues to be due until its due date (page 9).
- Global Supply Chain Finance Forum, Payables Finance, October 31, 2024. Supports: definition; program set-up; approval trigger; irrevocable commitment; 100% financing less a discount; reliance on buyer credit and recourse terms.
- Global Supply Chain Finance Forum, Receivables Discounting, October 31, 2024. Supports: definition; parties; recourse; facility set-up, funding and collection steps.
- Global Supply Chain Finance Forum, Factoring, October 31, 2024. Supports: definition and parties of factoring.
- Global Supply Chain Finance Forum, Pre-shipment Finance, 2016. Supports: post-shipment finance offered upon shipment.
- Global Supply Chain Finance Forum, Techniques, 2016. Supports: the loans or advances family of techniques.
- Global Supply Chain Finance Forum, Standard Definitions, 2016. Supports: publication in 2016 by BAFT, EBA, FCI, ICC and ITFA.
- International Chamber of Commerce, Standard Definitions for Techniques of Supply Chain Finance, January 9, 2017. Supports: the definitions as a living document requiring periodic updating.
- International Chamber of Commerce, ICC's new rules on documentary credits now available, December 4, 2006. Supports: UCP 600 implementation date, July 1, 2007.
- FCI, Press release: global supply chain finance jumps 35 percent, February 12, 2021. Supports: supply chain finance volume figures based on industry estimates.
- International Finance Corporation, World Bank Group and Banco Santander partner to unlock working capital and jobs, June 23, 2026. Supports: facility covering up to US$500 million of supply chain finance assets, expected to support about US$1.5 billion of transactions over three years.
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market day count, used in Figure 3.
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market rates annualized on a 360-day year, used in Figure 3.
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