Trade Finance to the rescue, as we have heard again and again that ‘Cash is King’. But that analogy only really sinks in when you find yourself in that all-too-familiar cash crunch. It can put your whole business at risk.
Unfortunately, this is a common cash flow problem faced by a lot of businesses. They wait for their debtors to pay them, so that they can make good with their suppliers. In these situations you really are stuck between a rock and a hard place.
Not only are there obvious financial implications, but it can have a significant effect on your reputation in the market. Luckily, there are a number of alternative funding sources that you can take advantage of in these situations. And in this article we’re going to focus on two in particular – trade finance and invoice finance.
Improve cash flow while preserving working capital
100% funding including deposit requirements
Utilise early payment discounts from suppliers
What is Trade Finance?
- Trade finance is an alternative source of funding designed specifically for businesses trying to manage complex supply chain considerations.
- Typically, you’ll get a revolving loan of sorts that offers much more generous payment options than your suppliers. And you’ll also get built-in foreign exchange management to pay suppliers wherever they happen to be in the world.
- This sort of financing means that your suppliers are paid immediately. While you only have to manage one debt back to the financier themselves.
- It helps directly with cash flow itself. But it also simplifies operations so that you’re not chasing your tail all along a complex supply chain.
What is Invoice Finance?
- The financier will give you the money upfront at a slight discount. That provider will then carry that timing difference and credit risk. And when the time comes, they collect the invoice amount from the debtor when they pay.
- This is a rather unique form of financing that can be extremely powerful when utilized in the right settings.
- It’s been transformational when it comes to working capital solutions. Here at Accrutus, we’ve seen so many clients over the years benefit from its flexibility and reliability.
When you enter into an invoice financing agreement, you are essentially selling off your customer invoices.
Accelerate business growth and strengthen relationships with local and international suppliers – without the cash flow challenges.
5 Powerful Trade Finance Methods
- Instant pay-out. The speed at which you can access your funds is probably the biggest advantage. As long as you have an approved account and an acceptable invoice, you can have that money paid out to you in real-time. This means that you can settle accounts with suppliers on time and keep your business going. Thus, leveraging the time you’ve saved in the process.
- Supplier bargaining. Every supplier relationship relies on solid negotiation. When you’re struggling to meet the deadlines, you find yourself in a very difficult position. If you’re savvy, however, you can use debtor finance like this to get better deals on your purchases. In addition, you can take advantage of early payment discounts, and much more. All of this can greatly improve your operating leverage.
- Shift the credit risk. Imagine not having to convince a bank to supply working capital on the basis of your company credit record. Instead, you can use the creditworthiness of your customers to back your application. This is a big deal for companies that struggle to get traditional bank finance. It gives them an outlet to fund their working capital.
- Ad-hoc usage. The very nature of invoice finance is that you can utilize it only when you need it. This flexibility is worth its weight in gold because you aren’t tying yourself into any long-term contracts. You can leverage it in an ad-hoc fashion. All that matters is that you’ve got an invoice to use, and you’re off to the races!
- Not shown on the balance sheet. This form of financing doesn’t show overtly on the balance sheet. This can be very useful when sharing financials with investors and other stakeholders. It keeps things much cleaner and shows a more accurate view of the business. It doesn’t let cash flow constraints hamstring the long-term outlook.
How best to use Trade Finance
- As with all financing options, you need to determine if this is the right option for you. Typically, working capital solutions should only be used to fund actual working capital gaps.
- These are what you need to fill in order to continue smooth operation. You shouldn’t think of this financing as a means to finance long-term investments or anything like that.
- The more precise and focused your trade and invoice financing is, the more effective it’s going to be. You want to use this cash flow finance as a tool to manage timing differences.
- And this happens while you are looking at ways to solve the root cause of the crunch. This is how you can leverage this alternative funding source to kickstart your company’s growth.
- When you come to the table with that mindset, then these tools are phenomenally valuable. And it’s why we’re so excited about them.
The Accrutus Cash Flow Solution
Here at Accrutus Capital, we have been offering trade and invoice finance to our clients for some time now. It’s been incredibly rewarding to see how this alternative method has been so valuable for companies with cash flow constraints.
Working with us, you won’t get the same apathy that you might experience from a bank or another financial provider. Because our interests are tied to yours, we want to do everything we can to help you grow your operations. We genuinely care about our clients.
We focus on providing the most flexibility possible at an affordable price that doesn’t eat into your margins. We also don’t require any security for this financing. The trade invoices themselves serve as the collateral. You simply won’t find an easier and more convenient way to solve your cash flow problems.
Accrutus Capital is committed to increasing awareness for SMEs providing this generic business cash flow checklist. We can advise on different trade finance options, saving you time and money.
Looking to fund your cash flow?
Trade Finance Loans $5 million
- Set your own trading terms
- Track and manage your supply chain
- Tailored facilities from $100K to 5 million
- Pay your international suppliers with market leading FX rates
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