How Alternative Supply Chain Finance Companies Work

How Alternative Supply Chain Finance Companies Work

When a company wants to buy goods from a supplier, they need to find creative ways to pay for them if the cash is not immediately available.

They can either apply for open credit terms (less common) or go searching for the working capital from equity partners, private investment firms, supply chain finance providers, banks and non-banks.

Most suppliers require payment for products upfront. To the purchaser, this means finding a bank loan or other forms of loans. Loans are often tough to qualify for unless you’re a very desirable borrower if seeking traditional financing.

One option to your credit issue is supply chain financing.

Just like banks, supply chain finance providers provide funding to a business for the purchase of product from another business. Since banks have more regulation, they are often difficult to gain approvals from, even with good trading history. 

A company may be able to secure financing through a trade financing company, like Stak, without having to jump through the credit hoops or complexities of bank financing.

Supply chain finance enables suppliers to be paid in advance for production of goods or finished products. The funder uses the creditworthiness and financial strength of your buyers to advance funds toward the goods purchased. 

A trade financier can often provide structured lends through:

  • Purchase order funding
  • Letters of credit
  • Inventory Finance
  • Structured guarantees

The above funding products give buyers the confidence to stay in business and continue to purchase and sell products for profits. 

The benefits also extend to sellers, providing assurances and capital to continue to produce the products. Factories can often utalise the trade finance companies payment guarantees to borrow funds to manufacture and gain confidence to ship goods knowing they are guaranteed to be paid.

Using Supply Chain Financing to trade with confidence

Suppliers simply can’t operate if they are not being paid, they require working capital for raw goods, rent and labour. The main issue they have is they often have multiple buyers requiring product throughout production cycles. If suppliers are not paid on time by buyers, this may cause a cease in production and cause further disruptions to your own supply. 

When a buyers use supply chain financing, it enables faster payments. The lender (trade financier) pays the supplier and receives payment from the buyers once invoices are raised and paid by the end customer. In a lot of cases a third-party factoring provider advances funds to the trade financier to repay debts where a partnership exists.

Thanks to this lending processes, suppliers can stay afloat, obtain guaranteed payments and not lose or profits money when working with a buyers.

Some closing thoughts

In many market places, the inventory is needed immediately. Businesses involved in a supply chain often have large overheads and require payments quickly to continue to produce and delvier effectivley.

Supply chain financing through an international trade finance company like Stak enables buyers and sellers to close the cash flow gap when trading and provide guarantees that all parties will be paid promptly.

Need help fulfilling larger sales orders? Ask Stak.

.   .   .

Stak provides working capital to clients that sell to some of the largest buyers in Australia & overseas.

Leave a Reply

Your email address will not be published. Required fields are marked *

Up Next:

3 inventory finance strategies import businesses have used to grow sales

3 inventory finance strategies import businesses have used to grow sales