Reverse factoring, also known as supply chain finance, is a business arrangement in which a company offers its suppliers an early payment while passing the risk of non-payment to a third party. The company pays the third party, such as a financial institution, who then pays the supplier. This arrangement allows companies to make quick payments, freeing up their working capital and strengthening their relationship with suppliers. It is a mutually beneficial arrangement that can help companies maintain a positive cash flow and increase supplier satisfaction.