What is Supplier Finance?
Trade credit is another form for supplier financing. If your company needs to make purchases, you’re basically placing your orders with supplier finance. As soon as the company has received the purchase order, the financing company will extend the credit to you. They’ll put a purchase order with supplier. It is at this point that the supplier will handle the order and then, deliver the goods. As for the company that does supplier financing, they will be making payments to them directly. If you want to understand it better, then there’s more info here that you can use.
For all the products bought, the company will be sending an invoice by the time they receive the goods. For all of the services rendered, the invoice is going to include markup fee. 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. Actually, there is more info here you could check.
Better keep on reading if you want to be mindful of the various benefits that supplier financing can do for a business.
Number 1. Long term payment – the financier would give you at least 4 months to pay the goods back. For majority of businesses, this is enough time to honor their promises without making too much compromise.
Number 2. Direct payment – through supplier financing agreement, the payment can be made straight to the supplier. In the business world wherein money has competing needs, making a direct payment ensures that the cash will not be redirected to other business needs. You can get more info here regarding this matter.
Number 3. Discounts – you can get discounts from your financier if you were able to make early payments. The money can be used for more important things which can benefit the business in the future.
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.