How Useful Supplier Finance is?
Trade credit is another form for supplier financing. If your company needs to make purchases, you’re basically placing your orders 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.
The moment that you have received the goods, the company will send invoice for all products bought. For all of the services rendered, the invoice is going to include markup fee. In most cases, the markup for services will range from 2 to 3 percent every month. 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 caters both small and medium sized businesses so long as they meet its eligibility criteria like 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.
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 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. If this is a bit confusing on your end you can have more info here.
Number 3. Discounts – you can get discounts from your financier if you were able to make early payments. Here, the money could be used for things that are more valuable for the business.
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 are going to get more info here.