How to fund large stock items prior to customer payment

Are you able to make sales but struggle to make supplier payments due to suppliers demanding COD terms or interruptions and limitations to your working capital? Supply chain finance can bridge the gap between the sales you make and meeting supplier payment terms, so that you continue to grow your business and don’t lose sales to your competitors.

There are some businesses that have high input costs for large or expensive items – specialist manufacturing or engineering businesses for example, or retail businesses such as swimming pool sales, tiling, roofing, etc. These types of businesses often need to pay for key items (and any associated installation or manufacturing costs) prior to receiving payment from their customers. Business income is often limited by the amount of working capital available to fund these jobs – money spent on supplies is money that can’t be spent on labour for installation, thus the business stops growing or loses work to competitors. Supply Chain Finance is a tool that can be utilised to release the working capital locked away in your business so that you can meet supplier terms and customer demands.

How does Supply Chain Finance help? The financier makes supplier payments on behalf of the client, allowing the client to repay the financier at a later date (ideally after the client has received payment from their own customers). In this way, the client effectively never spends their own funds to pay for supplies. The money not spent on supplier payments can then be used to pay wages and other production costs, meaning that more jobs can be completed in the same time period. With this in mind, what would be the opportunity cost of not having supply chain finance? When your business can make money without having to spend any more money, the cost of the facility is negative – it literally puts money in your pocket!

Because supply chain finance frees up your working capital, your business will have access to extra funds that can be used for any business purpose. Would your business grow if you spent more on advertising, or an expansion of premises/equipment, or more staff? There are many ways that funds can be used to grow a business, the key is that supply chain finance can unlock the funds you currently have locked up as working capital.

Our supply chain finance facility works without any extra debt taken on by your business – it’s not a loan and you don’t need to risk your house to obtain the finance. It doesn’t impact your existing business banking relationships or facilities, it doesn’t impact your current or future borrowing capacity, and we don’t lock you in to a restrictive contract – our facility allows our clients the flexibility to manage which suppliers and which invoices are uploaded onto our system for funding, giving them full control of their working capital.

Contact us directly for an obligation free consultation on how Capitalise Business Finance can help you manage your working capital needs.

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