How sustainable trade finance strengthens supply chain resilience

Global supply chains used to be built on an assumption of predictability, but several years of profound disruption have made that harder to justify.

Companies may not know where the next shock will come from, but they need supply chains that will continue to function when it hits. Many have responded by changing where and how they source goods. U.S. Bank’s spring 2026 CFO survey finds that 62% of organizations with manufacturing operations overseas have moved some manufacturing closer to the U.S. through nearshoring, and 37% have reshored activity. About half (51%) of organizations with domestic or international supply chains have diversified suppliers across multiple countries.

Actions like these can reduce an organization’s dependence on individual suppliers or markets, but they can’t remove uncertainty altogether: tariffs can change and transport networks can be disrupted with little warning.

One response is to create an “all-weather” supply chain resilience strategy. Instead of trying to predict the next disruption, the organization builds its capacity to respond to a range of conditions. So when the business environment is relatively stable, the supply chain operates as normal. When conditions deteriorate, the company already has the processes and financial flexibility it needs to manage the shock.

Liquidity can provide a buffer against disruption

Financial resilience is an important part of being prepared. Trade and working-capital finance can help buyers manage their own liquidity while supporting the financial health of their strategically important suppliers. And supply chain finance in particular can allow buyers to preserve cash for longer while giving participating suppliers earlier access to payment.

“Companies no longer assume supply chains will operate in a predictable environment,” says Rebecca Franco, senior vice president and head of Sales Enablement and Program Management for Trade and Working Capital at U.S. Bank. “They’re planning for a future where disruption is a permanent feature of the operating landscape. That has become the new norm. As a result, trade and working capital have evolved from tactical financing tools into strategic liquidity levers that support growth and balance-sheet efficiency.”

Sustainable trade finance goes beyond the balance sheet

Companies also need to consider the financial health of the suppliers their operations depend on. For decades, businesses sought to make their supply chains more efficient, partly by reducing inventory and the amount of capital tied up in their operations. But disruptions such as the COVID-19 lockdowns have exposed the vulnerability of supply chains that are designed mainly for efficiency. “The minute you had one hiccup in the physical supply chain, the whole thing collapsed,” says Mike Stitt, head of Trade and Working Capital Origination at U.S. Bank. “We saw that when container ships were sitting off the coast of Long Beach in 2021, unable to get goods into port to feed just-in-time inventory. The whole thing tipped over.”

Organizations need to look beyond tactics such as reducing their inventory. Instead of seeing every supplier relationship as a standalone transaction, there are benefits to considering the financial health of the supply chain as a whole. Extending payment terms, for instance, can improve a buyer’s working-capital position.

But there’s less of an advantage if the change puts an important supplier under financial strain. So a more resilient approach would consider the health of the supplier network as well as the buyer’s own balance sheet. It’s not just about how a company can optimize its own capital, but also how liquidity can reach the most crucial parts of its supply chain.

Working-capital finance can bridge the timing gap

The basic mechanics of supply chain finance are relatively straightforward. Consider a manufacturer that buys components from a supplier on 60-day payment terms. The manufacturer wants to retain its cash for those 60 days, while the supplier would prefer to be paid sooner. A bank can bridge this gap:

1. The manufacturer approves the supplier’s invoice.
2. The supplier chooses to receive early payment from the bank.
3. The bank pays the supplier.
4. At the end of the original 60-day period, the manufacturer pays the bank rather than the supplier.

There can be benefits for both sides: the buyer retains its cash for longer, which gives it greater flexibility to fund inventory or other operating needs. The supplier, meanwhile, receives its payment earlier and may avoid having to arrange more expensive short-term borrowing of its own. So effective working-capital finance can help to align the timing of cash flows across different businesses in the supply chain.

The appropriate financing structure will vary across the supplier base. A useful first step for large companies with a diverse collection of suppliers is to work with their banks to analyze spending and what each supplier provides. This will help them to understand which of those relationships matter most.

This might include the suppliers that account for the largest share of annual expenditure, but it’s not just them. A smaller supplier that provides a critical component, for example, could be just as important to operational continuity. Segmenting the supplier base in this way can help an organization decide where different financing arrangements are most useful, and where supporting a supplier’s financial health could have the greatest impact on the resilience of the company and its wider ecosystem.

Financing can also act as a shock absorber

There are clear advantages to supply chain finance when business is running normally: buyers can manage the timing of their cash flows, and participating suppliers gain more predictable access to liquidity. But working-capital financing could be even more valuable when conditions deteriorate. Consider, for instance, a manufacturer importing a part that suddenly becomes subject to a new tariff. It may have to meet the additional cost before it has completed production or sold its finished product. Any rise in commodity prices or freight costs can create a similar problem.

Supply chain finance doesn’t remove those costs, but it can help a company to manage the resulting pressure on cash flow. “In that scenario, the manufacturer essentially had to pay the tariff up front,” says Stitt. “What we’re doing is giving them more time on the other side, so they can collect payment from their client before settling what they owe. It’s about getting those timings to match up.”

On the supplier’s side of the equation, financial stress can travel quickly through a supply chain if a smaller company needs additional liquidity at the same time as financing conditions become more difficult. “Usually, when disruption occurs, the problem isn’t that the goods can’t be produced,” says Franco. “It’s that someone in the supply chain suddenly experiences a liquidity squeeze. Tariffs are one example, but so are issues such as commodity-price volatility and surging freight costs.”

This is where it helps to have a supply chain finance facility in place ahead of any disruption. Suppliers that are already participating can continue to access earlier payment instead of seeking emergency finance at a time when lenders may also be reassessing risk. And the buyer can retain more liquidity to absorb its own higher costs.

Strong trade credit risk management is still important, because banks will need reliable information about approved invoices and the buyer’s ability to meet its obligations. But there’s a strategic advantage for the company: financing capacity is already embedded in the supply chain, ready for when it’s needed.

Build the capability before it’s urgent

To put this type of structure in place, companies need to do more than just choose a financing product. Establishing the necessary operational capability may require them to:

• Adjust enterprise resource planning configurations
• Refine accounts-payable processes
• Establish clear payment-routing procedures
• Make supplier onboarding straightforward
• Align treasury, procurement and accounts payable
• Secure senior sponsorship and shared objectives

Employees need to know when a supplier has already been paid by the bank and where to direct a payment when the invoice needs final resolution.

Supplier participation and internal alignment also matter. A well-designed financing structure has limited value if strategically important suppliers don’t use it, so companies need to make onboarding straightforward and explain the potential benefits clearly. And because supply chain finance typically cuts across several internal functions, including treasury, procurement and accounts payable, these teams need to work toward the same objectives. “The key success factor is alignment across procurement, treasury and payables,” says Stitt. “You need a unified working-capital strategy, with incentives that support the same objectives. If that alignment is missing, the program could be compromised.”

This alignment can have practical consequences. If treasury wants to improve working capital by renegotiating supplier payment terms, procurement may have to conduct the negotiations. Implementation can stall if procurement’s objectives or incentives don’t support the same strategy. So the most effective supply chain finance capabilities are unlikely to be the responsibility of treasury alone – they require senior sponsorship and shared objectives across treasury, procurement and accounts payable.

Resilience is about being prepared

Segmenting suppliers and introducing financing arrangements will be difficult in the immediate aftermath of a supply chain shock, with buyers and suppliers potentially looking for liquidity at the same time.

Instead, a well-established supply chain finance strategy can provide a framework that operates in all weathers. In more stable periods, that means it can support working-capital efficiency. But when volatility intensifies, it can give buyers and suppliers more flexibility in managing cash flow. The challenge for companies isn’t to predict the next disruption; it’s about having enough financial flexibility to respond when the shock hits.

In today’s uncertain market, financial flexibility can help make supply chains more resilient. Connect with your U.S. Bank relationship manager to explore how supply chain finance can support your working-capital goals and strengthen your supplier network.