Demystifying Supply Chain Finance vs. Invoice Discounting: What Should MSMEs Choose?

It is very important to ensure access to the working capital for the survival and growth of micro, small, and medium enterprises (MSMEs) in the cutting-edge competition prevailing in the business world today. Two of the most talked about working capital financing solutions, supply chain finance and invoice discounting, are also two of the most misunderstood. Yet because the two seek to address the same problem of cash flow, it’s important for MSMEs to understand the distinctions so they can make informed choices. Here is a simplification to help you make the right decision and how Vayana is helping businesses with invoice discounting solutions by reinventing the way of doing business.

What is supply chain finance?

Supply Chain Finance (SCF) is a collaborative financial system between buyers, suppliers, and financial institutions. It helps MSMEs (generally suppliers) collect early on their invoices by using the buyer’s creditworthiness. As a result, the liquidity of the supplier increases with no effect on the buyer’s cash cycle.

Benefits of Supply Chain Finance:

• Lower cost of capital by use of the buyer’s credit

• Faster access to funds

• Enhances relationship with producers and suppliers

What is invoice discounting?

Invoice discounting is a form of financing in which a company uses its unpaid invoices as security for receiving cash advances from a lender. It is independent of the credit rating of the buyer, as against factoring, which is dependent on the buyer of the MSME but dependent on the reliability of the MSME itself and the invoices in their possession.

Benefits of Invoice Discounting:

• There is such discretion among the buyers that no one is involved.

• fast access to working capital

• Flexi Business financing to support my business needs

Vayana, a pioneering trade finance firm, provides comprehensive invoice discounting solutions that cater to the specific needs of MSMEs, addressing their working capital requirements for better growth and expansion opportunities.

Supply Chain Finance vs Invoice Discounting: Key Differences

Feature	Supply Chain Finance	Invoice Discounting
Based On	Buyer's credit	Seller's invoice credibility
Buyer Involvement	Required	Not required
Confidentiality	Low	High
Best For	Suppliers to large corporations	MSMEs with multiple buyers

Both have their use cases; however, with Vayana’s technology-led platforms, as you opt for SCF or Invoice Discounting Solutions, the experience is effortless, safe, and quick.

Why Choose Vayana?

Working to democratize finance, Vayana gives the smallest of entrepreneurs the wings to fly with:

• End-to-end digital onboarding

• Live invoice checker

• Cheap working capital finance For low-cost working capital finance, use your unpaid invoices to apply for a business loan in 24 hours.

• Integration with ERP and even accounting systems.

Vayana Invoice Discounting Solutions are customized to enable MSMEs to be credit-ready and maintain liquidity, reducing dependence on traditional financing options and ensuring business continuity.

Final Thoughts

Read more: MSMEs should first assess their buyer relationships, number of invoices, and financing requirements before deciding between supply chain finance and invoice discounting. When discretion and flexibility are your priority, Invoice Discounting Solutions may suit you better. With a reliable partner like Vayana, quick, affordable, scale-up finance is just a click away.