Financing That Masks ‘Hidden Debt’ Stokes Accounting Anxiety

It’s a financing tool to free up cash used by companies as diverse as the makers of Behr paint to the peddlers of Dr. Pepper—and it’s in regulators’ crosshairs.

Supply chain financing—a complex technique that lets companies extend the time it takes to pay their suppliers—can make money available for hiring more workers or investing in new technology. But it also can mask looming debt, in part because of murky rules on how to account for these transactions, say a growing chorus of investors, ratings agencies, and regulators.

That could soon change. As the Securities and Exchange Commission presses companies ...