Reverse factoring, also known as supply chain financing, is a financial arrangement where a buyer collaborates with a financial institution to pay their suppliers earlier than the standard payment terms. In this setup, the supplier submits an invoice to the buyer, who then approves it. The financial institution pays the supplier immediately, allowing them to receive funds sooner. This process benefits all parties involved. Suppliers gain quicker access to cash flow, improving their liquidity, while buyers can negotiate better payment terms. Additionally, the financial institution earns a fee for facilitating the transaction, creating a win-win situation for everyone in the supply chain.