Basic knowledge of supply chain finance

First, the financial connotation of the supply chain

In the whole supply chain, in order to control costs, strong enterprises will inevitably occupy the funds of weak enterprises in the supply chain, resulting in insufficient liquidity in the supply chain, which makes these enterprises appear a large number of prepayments, inventory occupied funds, accounts receivable and so on. Based on the supply chain, supply chain finance unifies the traditional information flow, commodity flow and capital flow, revitalizes current assets such as prepayment, inventory and accounts receivable, and sets financing schemes according to the industry characteristics of supply chain enterprises, thus effectively injecting funds into related enterprises in the supply chain.

Supply chain finance is based on the core enterprises and the real trade background, and adopts self-compensation trade financing. Supply chain finance is a new financing model for small and medium-sized enterprises, which effectively integrates the capital flow into the process of supply chain management, providing both trade capital services for enterprises in all links of the supply chain and new loan financing services for vulnerable enterprises in the supply chain.

Second, the supply chain financial model

From the perspective of organization, supply chain finance can be divided into three modes: logistics enterprise-led mode, core enterprise-led mode and financial institution-led mode, which is called the organizational mode of supply chain finance; From the perspective of business operation, supply chain finance can be divided into accounts receivable financing model, financing warehouse financing model and confirmed warehouse financing model, which is called supply chain finance business model.

1, the organizational model of supply chain finance

(1) Logistics enterprise-led mode: The supply chain finance mode led by logistics enterprises refers to an innovative mode in which logistics enterprises extend the account period for core enterprises and provide financing services for upstream and downstream SMEs by virtue of the logistics cooperation relationship with the participating units of the supply chain and the advantages of customers and information they have mastered. Commodity trading in modern society mainly adopts the way of credit sale. For the weak upstream suppliers, after providing goods, they are listed as "accounts receivable" assets on the balance sheet, that is, small and medium-sized enterprises can not obtain cash assets immediately, which will make them face the problem of insufficient funds or even broken capital chain. In this mode, logistics enterprises can take advantage of their information advantages and customer relationship advantages to provide short-term financing services based on "accounts receivable" for upstream suppliers facing financial pressure. The operation flow of the supply chain finance mode led by logistics enterprises is shown in Figure 1:

Figure 1: Flow chart of supply chain finance mode led by logistics enterprises.

(2) Leading mode of core enterprises: The core enterprises in the supply chain refer to high-quality enterprises with large scale, good reputation, perfect system, sound financial system and extensive financing channels in the industrial ecology of the supply chain, which have certain control and management functions for upstream and downstream SMEs. In the industrial ecology of supply chain, core enterprises can always establish a harmonious relationship with upstream and downstream small and medium-sized enterprises from the perspective of the healthy and stable development of the whole supply chain, and upstream and downstream small and medium-sized enterprises also rely on core enterprises for survival. At the same time, the long-term development of upstream and downstream SMEs in the supply chain will directly affect the supply and sales of core enterprises' products, and even affect the success or failure of core enterprises' product strategies, which determines that core enterprises must consider financing difficulties and financing costs for upstream and downstream SMEs. Core enterprises initiate the establishment of supply chain development funds according to their own advantages to provide financial support for the development of upstream and downstream small and medium-sized enterprises, thus forming a supply chain financial model dominated by core enterprises. See Figure 2 for the operation flow of supply chain finance mode led by core enterprises:

Figure 2: Flow chart of supply chain finance mode led by core enterprises.

(3) Leading mode of financial institutions: Compared with other participants in supply chain finance, financial institutions themselves have good capital advantages, and capital lending is the main business of financial institutions, with a complete capital lending process and risk assessment system. As a typical representative of financial institutions, commercial banks will explain the leading mode of financial institutions on the basis of commercial banks. In the traditional lending model of commercial banks, in order to avoid risks, commercial banks have a set of strict and cautious credit evaluation system to strictly examine borrowers. Due to the lack of collateral and opaque information, it is difficult for SMEs to obtain credit support from commercial banks. Even if a loan is obtained, the loan scale is relatively small or the loan interest rate is relatively high. Although small and medium-sized enterprises are a huge market for banks, under the traditional credit model, banks can only flinch. The supply chain financial model can skillfully solve this problem: banks organically integrate the participating enterprises in the whole supply chain, and banks no longer issue credit to individual enterprises in the supply chain, but comprehensively consider the operating mechanism, development prospects and credit status of the whole supply chain to lend to small and medium-sized enterprises. See Figure 3 for the operation flow of the supply chain financial model led by financial institutions:

Figure 3: Flow chart of supply chain finance mode led by financial institutions.

2. Business model of supply chain finance

(1) Financing mode of accounts receivable: With the development and perfection of China's economic marketization, credit sales have become the most extensive trading mode. With the increasing business of credit sales, enterprises have produced a large number of accounts receivable. Accounts receivable financing mode refers to the financing business in which financing enterprises obtain loans by pledging notes receivable as the subject matter to obtain liquidity. Based on the supply chain finance led by commercial banks, this paper expounds the financing mode of accounts receivable.

In supply chain finance, after a capital-demanding enterprise signs a contract with a core enterprise, it is often agreed to adopt the payment method of goods first and then payment, and the core enterprise issues accounts receivable bills to the capital-demanding enterprise, which has accounts receivable. In order to have enough funds to continue to put into production and operation, capital-demanding enterprises pledge their rights to financial institutions with accounts receivable and obtain loans. Core enterprises provide relevant explanations and promise to pay sales rebates to financial institutions as a way for capital-demanding enterprises to repay loans, and financial institutions decide whether to issue loans after examination. See Figure 4 for the operation flow of accounts receivable financing mode:

Figure 4: Flow chart of accounts receivable financing mode operation

(2) Confirmed warehouse financing mode: also known as prepaid account financing mode, specifically refers to a specific bill business in which bank acceptance bills are used as settlement tools, commercial banks control inventory, third-party logistics enterprises accept goods entrusted by commercial banks, and sellers buy back warehouse receipts as guarantees other than bank acceptance bills. From this definition, it can be seen that the financing mode of confirmed warehouse is aimed at the procurement link of downstream enterprises (buyers), and the core enterprises (sellers) pledge to buy back with "warehouse receipts" as collateral, thus ensuring the financing activities of downstream enterprises.

In the procurement stage, the supply chain financing business model of prepayment financing is adopted to delay the "cash" time as much as possible, thus reducing the cash flow gap. Enterprises with capital needs apply to financial institutions for warehouse receipt pledge loans according to the purchase and sale contracts, which are specially used to pay the payment for this transaction to the core enterprises. If the financial institution agrees to provide financial support after examination, the financial institution will sign a warehousing supervision agreement with the third-party logistics enterprise; After receiving the notice that the financial institution agrees to finance the capital-demanding enterprise, the core enterprise will deliver the goods to the warehouse of the logistics enterprise designated by the financial institution, and pledge the obtained warehouse receipt to the financial institution, which will provide it with the bank acceptance bill and make an agreement with it to buy back the part other than the bank acceptance bill; After the warehouse receipt is pledged, the capital-demanding enterprise pays the deposit to the financial institution, and the financial institution issues a corresponding proportion of the right to take delivery to the small and medium-sized enterprises, and informs the third-party logistics enterprise to issue a corresponding number of goods to the capital-demanding enterprise, and the capital-demanding enterprise obtains the right to take delivery and extracts a corresponding number of goods from the warehouse; This process continues to deteriorate until the balance of the margin account is equal to the amount of the bill of exchange, and the fund-demanding enterprise takes delivery. See Figure 5 for the operation flow of the confirmed warehouse financing mode:

Figure 5: Operation Flow Chart of Confirming Warehouse Financing Mode

(3) Financing mode of financing warehouse: financing mode of financing warehouse, also known as inventory financing mode and chattel pledge financing mode, specifically refers to a financing mode in which financing enterprises pledge inventory as the subject matter to financial institutions to apply for credit support, and the sales income supported by credit funds is the first source of repayment of credit funds. Through the organic combination of logistics, information flow and capital flow, the financial warehouse business model has built a platform for unified management, comprehensive coordination and business integration.

After signing contracts with core enterprises, enterprises with large capital requirements are often required to pay the payment as soon as possible after receiving the goods. Capital-demanding enterprises have a certain payment period for the goods they sell, which leads to their lack of sufficient funds to invest in production and operation. In order to obtain sufficient funds, capital-demanding enterprises provide inventory pledge to financial institutions with these goods and obtain loan funds support. If a financial institution decides to provide loan support after examination, it shall entrust a third-party logistics enterprise to evaluate the value of the movable property provided by the capital-demanding enterprise, and the third-party logistics enterprise shall issue an evaluation certificate to the financial institution after the value evaluation; If the chattel conditions meet the pledge conditions, the financial institution shall check the loan amount, sign a chattel pledge contract with the capital-demanding enterprise, and sign a warehousing supervision agreement with the third-party logistics enterprise. Capital-demanding enterprises hand over movable property to third-party logistics enterprises, and logistics enterprises check and accept the handed-over movable property and notify financial institutions to issue loans. Financial institutions issue loans to enterprises that need funds. See Figure 6 for the operation flow of financing mode of financing warehouse: