Financing suppliers and major purchases in emerging market currencies

A Swiss SME may need to pay an overseas supplier weeks or months before the purchase generates revenue, creating a working-capital gap. Advance payment is common in many commercial relationships outside Europe, particularly when a supplier relationship is still being established.

When the invoice is denominated in an emerging market currency, the business must also arrange payment in the required currency and manage the final CHF cost. Its bank may not support the currency or financing structure, or its process may not meet the supplier’s deadline.

Supplier-payment finance can bridge this gap by paying an eligible invoice in the supplier’s local currency while the Swiss business repays an agreed CHF amount later. Fixing that CHF amount at the outset provides certainty over the financed invoice, although other costs or currency flows may remain exposed.

When might a business need financing in an emerging market currency?

The need usually begins with the commercial terms. A supplier may require:

• a deposit before production begins;

• payment before goods leave the factory or port;

• a large order for inventory or raw materials; or

• payment for equipment before installation and commissioning.

Production, freight, customs clearance, installation, resale and customer terms can all extend the period before the purchase generates cash.

The contract or payment route may require the supplier's local currency. Paying locally is not automatically cheaper, but a local-currency quote can make the supplier's price and the buyer's conversion cost easier to compare. The SwissFx guide to emerging market currencies explains the access, liquidity and payment questions to check before agreeing the invoice currency.

Why might traditional bank financing not fit the supplier payment?

Bank credit remains one possible source of funding, but the available structure may not match the transaction. The bank may not lend in the required currency, may not finance that market or may need more time than the supplier allows. A CHF facility may be available, but conversion and payment would then need to be organised separately.

Borrowing from a local bank may require the business to have a legal presence and banking relationship in that country, provide financial and corporate records and, in some cases, offer collateral or a guarantee.

Compare each available structure against the same transaction: who pays the supplier, in which currency, when the business repays and what the total CHF obligation will be.

Step 1: Define the purchase and funding requirement

Map the complete purchase cycle. Record the supplier, goods or equipment, invoice amount and currency. Separate the deposit, milestones and final balance.

Then connect each outgoing payment to the commercial timeline:

• When does production begin?

• When are the goods expected to ship and arrive?

• When should the purchase begin generating revenue?

• In which currency will that revenue be received?

• Which cash inflow will fund the repayment?

The financing term should reflect a realistic cash-flow cycle, not only the contractual delivery date. Compare the expected timeline with a delayed scenario: if production, shipping or customer collection takes longer than planned, the financing may fall due before the purchase generates cash. CHF revenue aligns naturally with a CHF repayment, while revenue in another currency creates a separate conversion requirement. Confirm what would happen if the repayment date needed to be amended.

Step 2: Confirm how the supplier will be paid

Supplier-payment credit is tied to a commercial invoice. Through SwissFx, the business submits the invoice, our lending partner pays the approved supplier directly in its local currency and the business repays later in its domestic currency. Repayment may extend up to 150 days, depending on the arrangement.

Before accepting the financing, confirm:

• whether the invoice, supplier and transaction meet the applicable compliance and operational requirements;

• the currency and amount the supplier will receive;

• the payment route and expected delivery date;

• the documents and compliance information required; and

• whether the facility covers the whole invoice or only one payment stage.

Step 3: Confirm the CHF repayment amount and terms

The supplier receives the emerging market currency, but the Swiss business repays in CHF. The CHF amount is agreed at the outset, so the obligation for the financed invoice is known before payment rather than determined by a future spot rate.

That certainty should be documented clearly. The financing agreement or quote should show:

• the foreign-currency amount paid to the supplier;

• the total CHF amount due from the business;

• the repayment date or schedule;

• the financing charge, FX pricing and other fees included; and

• the treatment of late, early or amended repayment.

This removes exchange-rate uncertainty on the approved, financed amount. Freight, duties, installation or an uncovered invoice balance may still create separate exposure.

Financing an emerging-market purchase: from supplier invoice to CHF repayment

Step 4: Identify any FX exposure that remains

Once the financed invoice and CHF repayment are fixed, look for amounts outside the structure:

• a deposit already paid or a final balance not covered by the facility;

• freight, duties or installation costs in another currency;

• customer receipts in a foreign currency that will fund the CHF repayment; or

• repeated supplier payments made after the current facility expires.

Existing receipts or balances in the same currency may offset part of an exposure through natural hedging. For a confirmed future amount and date, an eligible business may consider a forward contract. For certain currencies, a non-deliverable forward (NDF) may be available instead. The underlying supplier payment remains separate from the NDF settlement.

Step 5: Compare the total cost in CHF

An interest rate alone does not show the full economic cost. Compare each option over the same period:

Compare this with available alternatives: existing CHF liquidity, a CHF bank facility followed by conversion, supplier credit or local borrowing. A lower nominal charge may not be the best fit if the term ends before customer cash arrives or leaves material exposure unmanaged.

Practical example: financing equipment purchased in INR

Consider a Swiss manufacturer ordering equipment from India. The supplier invoices in INR and requires payment before shipment. Its bank does not offer a suitable INR facility, while paying from cash would restrict normal operations.

1. The company confirms the invoice, shipping date, installation period and expected production date. Its revenue is mainly in CHF.

2. Following approval, the lending partner pays the supplier in INR.

3. The Swiss company accepts a total CHF repayment amount and date. Its cost for the financed invoice is therefore known before payment.

4. Installation is invoiced separately in INR and freight in EUR. These amounts remain exposed.

5. The team budgets them separately and assesses whether risk management is appropriate.

The funding, local-currency payment and remaining FX exposure are three related but distinct decisions.

Bringing supplier finance, payments and FX planning together

Financing an emerging-market purchase involves more than securing credit. The invoice currency, supplier payment route, CHF repayment date and expected cash inflows need to form a workable commercial cycle. When the CHF repayment amount is agreed at the outset, the cost of the financed invoice becomes more predictable. The business should still account for any costs or revenue flows outside the facility and compare the total CHF cost rather than the financing charge alone.

The currency flow may later reverse if the purchase supports sales in an emerging market. In this case, our guide to collecting and repatriating funds from emerging markets explains the main operational, currency and local-market considerations.

SwissFx provides supplier-payment credit in collaboration with a regulated lending partner. Eligible businesses can finance approved supplier invoices, arrange payment in the supplier’s local currency and repay the agreed amount in their domestic currency up to 150 days later, depending on the arrangement. SwissFx can also review the payment route and any separate FX exposure alongside the financing.

Important: This article is provided for general educational purposes only. It does not constitute financial, legal, tax or credit advice. Eligibility criteria, available currencies, credit limits, pricing, documentation and repayment terms depend on the business and transaction and must be confirmed before proceeding.