Trade finance shortens the cash cycle by funding receivables, inventory or payables one term at a time
Back to the Trade Finance Guide
Ossiano Guides · Cost and working capital
Open account terms leave sellers funding 30 to 90 days of trade. Receivables, inventory, payables and export working capital finance each release part of that cash.
Terms like this have a quick explainer. Tap or hover on them.
01 · The cash gap
Open account terms leave sellers funding one to three months of trade
A business needs cash to keep trading. The money it has tied up in buying, holding and selling goods is its .
A lot of that cash waits on customers. In an sale, the goods ship first and the buyer pays later. This trade credit is usually due in 30 to 90 days, and is often extended to 120 days, according to an International Monetary Fund paper from October 2017. Until the buyer pays, the seller funds the trade.
Finance teams measure the wait with the . It counts the days cash is tied up in trading. The standard formula, set out by the Association of Corporate Treasurers, has three parts. Add (how long stock sits) and (how long customers take to pay). Then take away (how long the business takes to pay its suppliers).
Each day in the cycle holds one day of sales. Take an illustrative company with annual revenue of $36,500,000. One day of sales is $100,000. With 60 days of sales outstanding, 75 days of inventory and 45 days of payables, its cycle is 90 days. That ties up $9,000,000.
Trade finance works on one part of the cycle at a time. The sections below take each part in turn.
Figure 1 · Try it
How much cash each trade finance lever releases
Set revenue and your three day counts, then move the receivables and payables levers to see the cycle and the cash released.
Receivables lever: customers' invoices turned into cash earlier by, days
Payables lever: payment terms longer by, days
Cash conversion cycle
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Cash tied up in the cycle
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Cash released versus the starting cycle
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How it works: the cash conversion cycle equals DSO plus DIO minus DPO. Cash tied up equals revenue divided by 365, times the cycle. The receivables lever takes days off DSO; the payables lever adds days to DPO. The inventory finance cost equals the value of the inventory funded, times the rate, times the days held, divided by 360.
Our Research Desk used cash tied up = revenue / 365 x (DSO + DIO - DPO), with inventory funding cost = value x rate x days / 360. The rate is for illustration and is not Ossiano pricing.
This calculator explains the concept only. Real programs carry fees, eligibility limits and advance rates that change the cash released.
02 · Receivables
Receivables finance turns sales into cash before the due date
Receivables are the invoices customers still owe. Receivables finance lets the seller turn them into cash now, instead of waiting for the due date.
The best-known form is . The seller sells its invoices to a finance provider, called the factor. In international factoring, the exporter receives payment up front from the factor by way of a against the invoice, as FCI describes it. The discount is the factor's charge for paying early.
On the due date, the buyer pays the invoice to the finance provider. The provider then pays the seller the rest of the invoice value, less agreed fees and the discount, according to the Global Supply Chain Finance Forum's factoring page.
is a close cousin. The seller sells receivables to a finance provider at a discount, in the words of the GSCFF's Standard Definitions for Techniques of Supply Chain Finance.
For exporters, factoring can do more than speed up cash. can combine working capital finance, cover against the buyer not paying, bookkeeping for the invoices and collection, says the US International Trade Administration's Trade Finance Guide.
Back to the illustrative company. If receivables finance cuts its days sales outstanding from 60 to 30, its cycle falls from 90 to 60 days. That releases $3,000,000.
03 · Inventory
Inventory finance funds goods held in stock against their value
Stock that sits in a warehouse also ties up cash. pays for goods while they are held or stored, according to the GSCFF's definition of a loan or advance against inventory. The provider takes a security interest in the goods, which is a legal claim over them, and keeps a measure of control.
The provider does not fund the full value. It advances only a percentage, to keep a , the GSCFF says. That share is the .
A US regulator's sample form shows what this looks like on paper. The National Credit Union Administration's sample certificate for examiners caps the inventory advance rate at 50% and the receivables advance rate at 80%. It is a sample of the form, not a guide to market rates.
Inventory finance does not shorten the cycle. The goods still sit in stock for the same number of days. What changes is who funds them. In the illustrative case, 75 days of inventory is worth $7,500,000. Funding it at 6.00% a year for 75 days costs $93,750.00. That uses simple interest on a 360-day year (), the US money market standard named by the Alternative Reference Rates Committee and used in the Federal Reserve's H.15 rates.
04 · Payables
Payables finance lets buyers pay on term while suppliers take cash early
starts with the buyer. It is a buyer-led program in which sellers get finance by selling their receivables, according to the GSCFF's Standard Definitions. The supplier can choose to receive the discounted value of its invoices before the due date.
This works for both sides. The supplier gets paid early. The buyer pays on its agreed terms. Back to the illustrative company: if its payable days move from 45 to 75, its cycle falls from 90 to 60 days and $3,000,000 is released. This is arithmetic only, not a suggestion to change any supplier's terms.
US companies that run these programs now report them. Under , issued in September 2022, the Financial Accounting Standards Board requires a buyer with a to disclose the program's key terms every year. The buyer also shows a , which tracks the amounts confirmed and then paid.
The filed amounts are large. Procter & Gamble reported supplier finance program obligations of $5,790 million at June 30, 2025, up from $5,559 million a year earlier (SEC EDGAR). AT&T reported $4,455 million at September 30, 2025, up from $2,498 million at December 31, 2024 (SEC EDGAR).
Figure 2 · Interactive
Supplier finance on the balance sheet
Each card shows one company's disclosed supplier finance program obligations and the change on the prior period.
Sources: SEC EDGAR XBRL, SupplierFinanceProgramObligation: Procter & Gamble Form 10-K for fiscal 2025, filed August 4, 2025; AT&T Form 10-Q for Q3 2025, filed October 31, 2025; Boeing Form 10-Q for Q1 2025, filed April 23, 2025. Changes computed from the filed amounts.
This section describes what the standard requires companies to disclose. It does not assess how any program is reported.
05 · Export working capital
Public guarantees back the working capital behind export orders
Exporters often need cash before they ship. lets them buy the goods and services they need to support their export sales, the International Trade Administration explains.
In the US, public agencies help banks say yes. The covers 90% of the bank loan, including principal and interest, according to the EXIM Export Finance Solutions Guide of March 2026. Only the lender can apply. The money can pay for materials, equipment, supplies, labor and other inputs to fill export orders, EXIM says.
The rules are open to small deals. EXIM sets a minimum US content of 10% and no minimum or maximum transaction amount, on its Working Capital Loan Guarantee page.
The Small Business Administration runs a similar scheme. Its gives participating lenders up to a 90 percent guarantee on export loans of up to $5 million, according to the ITA Trade Finance Guide.
Figure 3 · Interactive
Follow the cash under four working capital tools
Tap a tool to see each step from shipment or order to repayment.
Sources: FCI; Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance; US International Trade Administration, Trade Finance Guide, 2022 edition.
06 · Measuring the effect
Companies report their cycle, so the effect shows up in the numbers
Listed companies publish the figures behind their cycle. That makes changes easy to follow from one period to the next.
Plexus reported an annualized cash cycle of 62 days for the quarter ended July 4, 2026. A year earlier, at June 28, 2025, it was 69 days. The figures are in its fiscal 2026 third quarter earnings release.
Trane Technologies reported days payable outstanding of 66.3 at June 30, 2026, up from 64.3 a year earlier, in its second quarter 2026 earnings release.
Finance costs show up too. Toro reported financing costs for distributor and dealer inventories of $79.4 million in fiscal 2025. They were $100.9 million in fiscal 2024 and $114.7 million in fiscal 2023, in its Form 10-K for fiscal 2025. Our guide to distributor finance covers how this kind of program works.
07 · Ossiano view
Working capital tools now show up in the accounts
OBSERVATION 01
Supplier finance at scale is disclosed
P&G reported $5,790 million of supplier finance program obligations at June 30, 2025 (SEC EDGAR), and AT&T $4,455 million at September 30, 2025 (SEC EDGAR). ASU 2022-04 makes the key terms an annual disclosure.
OBSERVATION 02
The cycle can fall from both ends
Plexus cut its annualized cash cycle from 69 to 62 days in a year (SEC filing). In the worked example, either lever releases the same $3,000,000. A shorter cycle frees cash without new sales.
Summary
Each trade finance tool works on one part of the cash cycle
Working capital stays tied up for the length of the cash conversion cycle. The cycle adds inventory days and receivable days, then takes away payable days. Trade finance works on each term. Factoring pays the seller up front at a discount. Inventory finance advances a share of the value of goods in stock. Payables finance lets suppliers take the discounted value of approved invoices before the due date. Export working capital finance pays for the inputs behind export orders, and US public guarantees cover up to 90 percent of the loan.
Related guides: The cash conversion cycle; Seasonal trade and working capital; Receivables finance; Payables finance; Inventory finance; Pre-export finance; Extending terms, keeping suppliers strong.
Instrument cards: Factoring; Invoice discounting; Inventory finance; Payables finance; Distributor finance; Pre-export finance; ECA-backed finance; Asset-based revolving facility. Every term on this page is defined in the Trade Finance Glossary.
The Ossiano Research Desk Market Read on factories and households covers the order and inventory cycles behind these numbers. For questions on how working capital tools apply to existing or planned trade flows, contact the Ossiano Research Desk.
Sources
- International Monetary Fund, Committee on Balance of Payments Statistics, Fintechs and the Financial Side of Global Value Chains: The Changing Trade-Financing Environment (BOPCOM 17/21), October 2017. Supports: open account trade credit usually due in 30 to 90 days, often extended to 120 days.
- Association of Corporate Treasurers, The cash conversion cycle (The Treasurer, Treasury essentials), October 2014. Supports: cash conversion cycle formula, page 46, used in the worked example and Figure 1.
- FCI, International Factoring, undated. Supports: the exporter receives payment up front from the factor by way of a discount against the invoice.
- Global Supply Chain Finance Forum, Factoring, technique page, October 31, 2024. Supports: on the due date the buyer pays the finance provider, which pays the seller the remaining value less fees and discount.
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance, 2016. Supports: receivables discounting as a sale of receivables at a discount; payables finance as a buyer-led program; the seller's option to receive the discounted value before the due date.
- International Trade Administration, US Department of Commerce, The Trade Finance Guide: A Quick Reference for U.S. Exporters, 2022 edition, July 2022. Supports: export factoring as a package of working capital finance, credit protection, bookkeeping and collection (page 22); export working capital financing definition (Chapter 8); SBA Export Working Capital Program, up to a 90 percent guarantee on export loans up to $5 million (page 26).
- Global Supply Chain Finance Forum (ICC, BAFT, EBA, FCI, ITFA), Standard Definitions: Loan or Advance against Inventory, 2016. Supports: finance for holding or warehousing goods with a security interest and a measure of control; advance of only a percentage of inventory value to keep a margin of protection.
- National Credit Union Administration, Examiner's Guide: sample certificate for asset-based facilities, undated. Supports: sample inventory advance rate not to exceed 50% and receivables advance rate not to exceed 80%.
- 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 the worked example and Figure 1.
- 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 the worked example and Figure 1.
- Financial Accounting Standards Board, Accounting Standards Update No. 2022-04, Liabilities: Supplier Finance Programs (Subtopic 405-50), September 2022. Supports: issue date; annual disclosure of key program terms; rollforward of obligations confirmed and paid.
- The Procter & Gamble Company, via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000080424, August 4, 2025. Supports: obligations of $5,790 million at June 30, 2025 and $5,559 million at June 30, 2024 (FY2025 10-K).
- AT&T Inc., via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000732717, October 31, 2025. Supports: obligations of $4,455 million at September 30, 2025 and $2,498 million at December 31, 2024 (Q3 2025 10-Q).
- The Boeing Company, via SEC EDGAR, XBRL company concept SupplierFinanceProgramObligation, CIK 0000012927, April 23, 2025. Supports: obligations of $2,703 million at December 31, 2024 and $2,107 million at March 31, 2025 (Q1 2025 10-Q).
- Export-Import Bank of the United States, EXIM Export Finance Solutions Guide (EBK-EFSG-26-03-20), March 20, 2026. Supports: Working Capital Guarantee covers 90% of the bank loan, including principal and interest; only the lender can apply.
- Export-Import Bank of the United States, Working Capital Loan Guarantee, undated. Supports: uses of funds for materials, equipment, supplies, labor and other inputs; minimum US content of 10%; no minimum or maximum transaction amount.
- Plexus Corp., via SEC EDGAR, Fiscal 2026 third quarter earnings release, Form 8-K Exhibit 99.1, July 29, 2026. Supports: annualized cash cycle of 62 days at July 4, 2026 and 69 days at June 28, 2025.
- Trane Technologies plc, via SEC EDGAR, Q2 2026 earnings release, Form 8-K Exhibit 99.1, Table 8 Balance Sheet Metrics, July 30, 2026. Supports: days payable outstanding of 66.3 at June 30, 2026 and 64.3 at June 30, 2025.
- The Toro Company, via SEC EDGAR, Form 10-K for fiscal year ended October 31, 2025, Financing Programs Narrative (Details), December 17, 2025. Supports: financing costs for distributor and dealer inventories of $79.4 million in fiscal 2025, $100.9 million in fiscal 2024 and $114.7 million in fiscal 2023.
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