Advance payment financing，provided by the manufacturer to his supplier，can be used to reduce the manufacturer’s and the supply chain’s profit losses resulted from the supplier’s capital constraints． We study the optimal operational and financial strategies of the advance payment financing mode and analyze the impact of the supplier’s initial capital and price discount rate on the supply chain’s performance．It is shown that given the price discount rate，the supplier would accept the advance payment financing contract if and only if his initial capital is smaller than a threshold value．If the price discount rate is higher than a critical value，the advance payment financing can restore the supplier’s production to the level without capital constraint; otherwise，the advance payment financing can restore the supplier’s production to the level without capital constraint and the supply chain’s performance will not be affected by the supplier’s capital constraints only if the supplier’s initial capital is larger than a threshold value．These results can be used for reference when firm managers make advance payment decisions．