The effect of reverse factoring financial changes on supply chain

Abstract

The consequences of reverse factoring in a supply chain are examined in this article. Reverse factoring occurs when a buying firm offers a reduced short-term borrowing rate to a supplier company in exchange for longer payment terms. From the standpoint of a supplier, this paper investigates the impact of rating changes, interest rate fluctuations, and business cycle position on the cost-benefit trade-off in the SMEs and manufacturing companies. However, the data was collected using a questionnaire. The main result is that changes in critical financial variables like ratings, news alerts and interest rates will shift former win–win circumstances for the supplier dependent on the business cycle into win–lose situations for the supplier. Overall, the reverse factoring results reveal sophisticated trade-offs, necessitating careful consideration in managerial decisions.

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