How Useful Supplier Finance is?
Supplier financing is otherwise known as trade credit. If your company needs to make purchases, you’re basically placing your orders with supplier finance. The financing company will begin to extend credit to you the moment that you’ve received the purchase order. They will then put a purchase order with the supplier. This is the time when the supplier would handle the order and deliver the goods. As for the company that does supplier financing, they will be making payments to them directly. There’s more info here that you can find which will help you understand it further.
The moment that you have received the goods, the company will send invoice for all products bought. The invoice includes markup fee for all the services rendered. Normally, the markup for service is ranging from 2 to 3 percent every month. Your business will be given up to 4 months to complete the payments. If you would like to find out how supplier finance works, there’s more info here.
Supplier financing can cater small and medium sized businesses given that, they have met its eligibility criteria similar to be a manufacturer or distributor of goods, a business should be in operation for 3 years, has minimum 2 million dollars annual revenue, have a sound product liability insurance and accurate financial statements.
Whether you believe it or not, this form of financing is more convenient to use in comparison to conventional financing options similar to bank loans given that you meet the requirements asked. Actually, there is more info here you could check.
There are various benefits that supplier financing can provide to a business and if you wish to learn about it, keep on reading.
Number 1. Long term payment – in paying the goods back, your financier will allow you 4 months to pay for it. For numerous businesses, this time is enough to meet their agreement without making compromises.
Number 2. Direct payment – with supplier financing agreement, the payment could be made directly to the supplier. In corporate world to which money has competing needs, being able to make direct payments only ensures that the cash would not be redirected to other business needs. You can get more info here regarding this matter.
Number 3. Discounts – if you can make payments earlier than expected, then your financier can give you discounts. This cash could be utilized for other needs that can benefit the business in the long run.
Number 4. Inventory – with supplier finance, it ensures that you will not run out of inventory and thus, enabling continuity of business and allows steady revenue at the same time. You will have more info here.