(Editor’s Note: As the supply chain finance landscape continues to evolve, the conversation doesn’t stop here. Continue it in person at Supply Chain Finance Convergence ’26, an SFNet event on March 3, 2026, at the Westin New York Grand Central. The authors of this article will be presenting on a panel exploring the convergence of ABL, factoring, and supply chain finance, along with the legal and risk considerations shaping the market.)

The Secured Finance Network, with the help of the Rutgers Business School Graduate class in Supply Chain Finance, recently conducted its 2025 Market Sizing Study. The purpose was to update the proportion of outstanding trade receivables financed through Supply Chain Finance (“SCF”) arrangements in the US, and in turn estimate the total size of the annual SCF flow in the US.  The study derived that approximately 12% of all outstanding trade receivables are being financed through SCF arrangements.  Using that “take-up” or “adoption” percentage and applying it to the 2024 data proved by the Federal Reserve, the study concluded that the SCF market in the US in 2024 was approximately $2.560 trillion. The updated study shows that the SCF market in the US has grown in step with the overall growth of trade receivables in the market.  More importantly, the results of the study set the stage for much broader implications that a growing adoption of SCF presents to the SCF ecosystem.          

Defining Supply Chain Finance

The rapid expansion of open account trade beginning in the 1980s created a need for global clarity, transparency, and consistent terminology across supply chains. Given that a significant share of global trade is conducted by small and medium-sized enterprises (SMEs), the standardization of SCF terminology was particularly important. In 2016, a group of international industry and regulatory bodies—BAFT, ICC, EBA, FCI, and ITFA—formed the Global Supply Chain Finance Forum to establish internationally recognized SCF terminology. This effort resulted in the Standard Definitions for Techniques of Supply Chain Finance, which remains the primary reference for SCF terminology.  Supply Chain Finance refers to a set of financing and risk-mitigation practices designed to optimize the management of working capital and liquidity invested in supply chain processes and transactions. In summary, common SCF solutions include reverse factoring (buyer-led), dynamic discounting, receivables financing (factoring), inventory financing and purchase order financing.  A brief overview of those solutions are detailed below:

• Factoring (Receivables Financing):A supplier sells its approved invoices to a funder at a discount for immediate cash, shifting the collection process to the funder.
• Reverse Factoring (Payables Finance/Supplier Finance):The most popular of the SCF solutions, where a buyer approves invoices and a financial institution pays the supplier early at a discount, with the buyer paying the bank later on the original terms.
• Inventory Financing:Funds are provided to suppliers based on the value of their inventory, offering liquidity before goods are even sold.
• Purchase Order Financing:Financing extended to a supplier to fulfill a large order, ensuring they have the capital to produce and ship goods.
• Dynamic Discounting:A buyer offers early payment to suppliers for a discount, with the discount rate varying based on how early the payment is made.
• Trade Credit Insurance:Insurance offered to protect against non-payment for goods, reducing risk, and enabling policy holders the ability to obtain better financing terms with lenders.

The parties that make up the SCF ecosystem are (1) suppliers (domestic and overseas) who provide goods and services; (2) buyers (domestic and overseas) who purchase goods and/or utilize services from suppliers; (3) lenders of suppliers; and (4) lenders of buyers.  Many would argue that the SCF ecosystem also includes owners and stakeholders of the parties detailed above, along with freight companies, customs brokers, and individual consumers.  However, for sake of the recent market study and its implications further detailed herein, we will assume the list above is exhaustive.

In many instances the players in the SCF ecosystem find themselves on both sides of the transaction. Suppliers are also buyers and vice versa.  The same goes for lenders.  Therefore, the benefits and risks associated with SCF solutions to suppliers and buyers, as well as lenders are realized by all in the ecosystem. 

The Study in Detail

The primary focus of the study was to update the estimate of the current stock (funds in use) and annual flow of SCF instruments in the United States. The calculation is expressed as the percentage of outstanding trade receivables in the US that are being financed through the various SCF arrangements available to both suppliers and buyers.  Better known as the “take-up” or “adoption” rate, this percentage, once updated, can then be used to help quantify the overall size of SCF arrangements being offered.  

Previously, research conducted by the Bank for International Settlements (BIS) in 2014 concluded that trade finance, accounted for approximately three percent of U.S. trade receivables at that time. In the interest of simplicity, and to avoid false precision, the SFNet assumed in 2021 that this take-up percentage had increased from three percent to five percent as SCF adoption has expanded over time.  However, the SCF ecosystem has been and continues to be shaped as of late by major disruptions, ranging from lasting impacts related to the COVID-19 pandemic, geo-political events, global supply chain shortages, and trade wars including recent tariffs.  All of these have had a significant impact on the need to maximize working capital to optimize procurement and supply chain functions and,r5t in theory, a direct impact on the take-up rate as well. Independently, a recent study commissioned by CITI Group estimated the growth rate of SCF at eight percent [1].

Much of the data related to the overall size of trade receivables in the US needed to determine the size of the overall annual SCF flow in the US is reported by the Federal Reserve.  However, the actual take-up rate to determine what percentage of those trade receivables that are financed through SCF arrangements remains elusive and seldom reported.  Only a handful of large publicly traded companies disclosed any type of relevant information related to the size of their SCF programs offered to suppliers.

In September 2022, the Financial Accounting Standards Board (FASB) issued an update to its disclosure requirements to improve transparency about supplier finance (or supply chain finance) arrangements under U.S. GAAP. This standard requires an entity that uses a supplier finance program in connection with purchasing goods or services to disclose both qualitative and quantitative information about those programs in the financial statement footnotes. Using these disclosures allowed us understand the level of use companies have of their SCF programs. This information, then gave us empirical evidence of the takeup rate that we should apply. Our most appropriate assessment is a takeup rate of 12% at the end of 2024. With this newly acquired understanding of the diffusion of SCF instruments in the marketplace, we had to adjust our implied takeup rate. In the preceding quarters, this takeup rate is believed to have grown at a consistent rate. To establish a smooth transition between the previously used percentages, we used 2019 as the starting point. This was chosen because the adoption rate surged during the COVID19 pandemic [3]. From that point forward, we used a smooth increase of about 2.8% each quarter. This increase is not meant to approximate actual increases in the takeup rate, but rather smoothly transition between previous assumptions and current empirical analysis. Further increases in the takeup rate should be analyzed based on actual company disclosures.

Analysis of the Study and its Implications

It’s of little surprise that the recent market study found a sizeable increase in the take-up or adoption rate of SCF arrangements in the SCF ecosystem.  In fact, an argument can be made that a take-up rate of 12%, as well as the resulting overall annual SCF flow of $2.560 trillion might be conservative based on the following:

1. The actual impact of recent disruptive forces detailed earlier including the impacts of tariffs, re-shoring, near-shoring, and the significant shift from just-in-time inventory to a more right-sized inventory model.
2. The growing need for corporate finance teams to increasingly collaborate with procurement and supply chain functions to seek ways to delay ownership and payment for inventory while maintaining buffer stock availability.
3. While banks continue to lead in cash-conversion-cycle optimization tools, they typically lack solutions focused on inventory, which consumes the largest share of working capital. In response, specialized fintech and trading companies have developed inventory-focused solutions that leverage procurement analytics and application programming interfaces (APIs). These solutions often rely on off-balance-sheet, true-sale trading structures to help firms optimize the capital tied up in inventory.Fintech offerings and trading platforms have filled in the working capital gaps that banks have created which has undoubtedly impacted access to SCF solutions and resulting take-up rates.
4. Efficiencies in procurement with the help of Artificial Intelligence and digitization across commercial, logistics and financial processes

As pointed out earlier, suppliers can simultaneously be buyers and lenders can find themselves providing financing for both suppliers and buyers in this ever-dynamic and fluid SCF ecosystem.  Until we have more systemic data on the actual amount of trade payables and trade receivables being financed through SCF arrangements, we can only assume that the reported take-up or adoption rates will remain conservative.     

This brings us to the inevitable question. What does all of this mean, and are the direct implications (benefits and risks) of increased adoption of SCF arrangements in the SCF ecosystem?

For Buyers

Increased uptake of SCF arrangements has significant impacts on liquidity, operational resilience and financial strategy by extending payment terms, improving working capital and fostering stronger and more stable supplier relationships.  SCF arrangements allow buyers to extend payables thereby keeping cash on hand longer and freeing up capital for investments, R&D, etc.  Increased utilization of SCF arrangements provide undercapitalized, small suppliers with access to liquidity, which helps strengthen the overall supply chain, and also ensure suppliers are able to meet demand and deliveries on time. Many SCF solutions provide efficiency through automation of invoices and payments via digital platforms that reduce manual errors and speed up transactions for all parties. Additionally, through this adoption of technology such as AI driven forecasting and block chain-enabled invoice settlement, transactions for buyers can improve and increase drastically.

However, the significant increase in adoption rates of SCF arrangements by buyers is not without risk.  In many instances, these risks can lead to sizeable financial hardship and losses to stakeholders and lenders. While the financial reporting benefits for buyers under SCF programs are many including classifying the amounts owed under SCF programs as accounts payable, instead of debt, actual leverage can seem lower thereby masking potential issues brought on by cash flow challenges down the road.  Finally, cybersecurity risks exist to buyers offering SCF arrangements through data breaches, technical glitches and cyberattacks.

For Suppliers

For suppliers, the increased take-up of SCF arrangements has significantly improved liquidity, operational resilience and financial strategy by being able to not only offer extended payment terms to win business, but also maintain working capital integrity and fostering stronger and more stable relationships with buyers while meeting working capital obligations with suppliers further down the supply chain.  Smaller suppliers now have access to lower cost of capital by leveraging the higher credit rating of the buyer through buyer-led SCF arrangements.  SCF arrangements help suppliers mitigate both overinvestment and underinvestment in inventories which optimizes capital allocation.  Similar to buyers, many SCF solutions provide efficiency through automation of invoices and payments via digital platforms that reduce manual errors and speed up transactions. Additionally, through this adoption of technology such as AI-driven forecasting and block chain-enabled invoice settlement, transactions can improve and increase drastically.

Suppliers are not immune to risks associated with the increase in SCF arrangements.  With access to lower-cost liquidity comes the potential for suppliers to commit the majority of their revenue stream to a handful of buyers offering SCF solutions.  Risk associated with concentration and over-reliance on a small number of end customers can lead to margin compression, receivables dilution, and significant losses.  In many instances, SMEs, as well as suppliers with little to no history selling to buyers offering SCF solutions, initially don’t qualify to participate in SCF arrangements offered. Finding this out too late can lead to financial hardship for those smaller suppliers who commit large amounts of resources establishing a relationship with a buyer and delivering goods.  Finally, cybersecurity risks similar to those associated with buyers under SCF arrangements also impact suppliers.   

For Lenders

For lenders, increased adoption of SCF arrangements creates significant opportunity to generate stable and “sticky” fee-based revenue streams.  It also broadens the customer base and deepens client relationships by building strong relationships with management and heads of procurement.  The utilization of data helps provide better risk management and tailored funding solutions, which lower the cost of acquiring customers.

Lenders are not immune to the risks associated with SCF arrangements.  With the convergence of many different arrangements and structures offered by lenders in the SCF ecosystem (many of which are provided without monitoring or fundamental credit diligence) the potential for fraud is greatly heighted as evidenced with First Brands, Tricolor, Stenn, and Greensill. 

What does an increase in take-up rates in SCF arrangements tell us and what does it mean for the secured finance ecosystem? It tells us that companies are more actively using financial tools and technology to optimize their working capital and improve liquidity.  It signals a shift from just-in-time inventory logistics to just-in-case resilience where firms can strengthen their supply chain networks against disruptions, higher operational costs, and higher cost of capital thereby lowering costs and increasing profits.  A larger uptake or adoption of SCF in the secured finance ecosystem means that the demand for access to working capital solutions is increasing.  This increased demand in turn provides lenders the opportunity to not just expand, but also strengthen borrower relationships while simultaneously increasing recurring revenue-based solutions for those borrowers more efficiently with less risk.

More Recent Implications in 2025 and Looking Ahead

2025 was a year driven by intense geopolitical tensions—specifically U.S. reciprocal tariffs as well as persistent high interest rates.  Therefore, the SCF landscape transitioned into a strategic, technology-driven tool to manage liquidity to ensure the viability of the SME supplier.  Companies moved away from a lean “just-in-time” inventory approach to one that was more of a “just-in-case” model.  Additionally, many companies had to re-shore their production to countries where the tariff impact was not as severe.  The liquidity crunch related to these events lead to SCF acting as a critical lifeline for smaller suppliers in order to prevent disruptions and maintain cash flow.  To secure their supply chains, large corporations increasingly extended their SCF programs to a broader swath of suppliers, not just their top suppliers.  Rather than just launching new programs, finance teams with larger corporations focused on improving utilization by their suppliers.  Finally, AI moved to more of a practical use, with approximately 45% of banks using AI for some type of trade finance solution in 2025 (up from 32% in 2024).  All this to say, there is a high likelihood that take-up or adoption rates of SCF in the US continue to increase.  In fact, some projections show a strong projected compounded annual growth rate in adoption rates of 9.2% through 2034 to keep up with surging demand for liquidity as a result of a continued volatile environment.  While the market study assumed a 12% adoption rate in 2024, it’s not unrealistic that rate actually grows to 15% or even higher to keep up with the surging demand for liquidity.  If we apply an adoption rate of 15% to the trade receivables reported in the US of $5.69 trillion at the end of Q3 2025, according to the latest Fed data, this translates into an annualized SCF market of $ 3.414 trillion or a staggering 30% increase above the $2.56 trillion we calculated for 2024.  While this is merely an assumption and might be slightly overstated, it is apparent that a slight, but yet not too unrealistic, increase in SCF adoption rates will continue to create significant opportunities for lenders in the SCF ecosystem. 

The authors would like to thank the following Rutgers Business School Graduate Students for their work on the SFNet Market Sizing Study: Gabrielle Carpenito, Junhe Chen, Sammi Cheng, Sairam Dabbiru, Manu Gaur, Vincent Han, Nikhil Jaison, Ranbeer Dilip Kadam, Rajat Rajesh Kawade, Haoran Lei, Yufei Liu, Sinan Murtaza, Ziang Ni, Sai Srekhar Parasa, Nisharg Patel, Pamela Patton, Audreyann Rasimowicz, Kevin Reshamwala, Anjaney Srinivas, Fola Wu, and Xiulan Yu.