Supplier financing is otherwise known as trade credit. When your company has to make purchases, you are making order with supplier finance. The moment that the company received the purchase order, the financing company begins to extend credit to you. They will then put a purchase order with the supplier. This is actually the point in time when the supplier will start handling the order and deliver the goods. The company that does supplier financing on the other hand will make payments to them directly. You may take advantage of more info here to understand the entire concept better.
For all the products bought, the company will be sending an invoice by the time they receive the goods. The invoice includes markup fee for all the services rendered. Oftentimes, 2 to 3 percent every month will be the markup for every service. Your business is given 1 to 4 months to make payments. You can check more info here if you wish to learn how supplier finance works.
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.
Given that you meet the mentioned requirements, you’d find this form of financing less strict than the conventional financing options similar to bank loans. There’s more info here that you can check.
There are many benefits that supplier financing could provide to businesses and if you like to learn more, better keep on reading.
Number 1. Long term payment – in paying the goods back, your financier will allow you 4 months to pay for it. A big number of businesses see this as a massive benefit in making payments without compromises.
Number 2. Direct payment – through supplier financing agreement, the payment can be made straight to the supplier. In business world to which money has a competing needs, making direct payments guarantee that the cash isn’t redirected to other needs of the business. You will be able to more info here.
Number 3. Discounts – if you could make early payments, your financier would be able to transfer discounts on you. This cash could be utilized for other needs that can benefit the business in the long run.
Number 4. Inventory – using supplier finance, this gives you assurance that you won’t run out of inventory. You are going to get more info here.