Supplier financing is a kind of trade credit. When the company needs to make a purchase, you place order 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. 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. There’s more info here that you can find which will help you understand it further.
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. In most cases, the markup for services will range from 2 to 3 percent every month. Your business will be given up to 4 months to complete the payments. You can check more info here if you wish to learn how supplier finance works.
Supplier financing is catering both small and medium sized businesses as long as they meet eligibility criteria such as 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.
So long as you meet the requirements mentioned, you’ll find this type of financing to be less strict compared to conventional financing options similar to bank loans. Fact is, there’s more info here that can help you out.
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 – the financier would give you at least 4 months to pay the goods back. A big number of businesses see this as a massive benefit in making payments without compromises.
Number 2. Direct payment – the payment can be given straight to the supplier using supplier financing agreement. 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 could make early payments, your financier would be able to transfer discounts on you. Here, the money could be used for things that are more valuable for the business.
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.