How Useful Supplier Finance is?
Supplier financing is a kind of trade credit. 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. This is the time when the supplier would handle the order and deliver the goods. The company that does supplier financing on the other hand will make payments to them directly. There’s more info here that you can find which will help you understand it further.
As soon as you receive the goods, the company will be sending invoice for all products bought. The invoice includes markup fee for all the services rendered. Normally, the markup for service is ranging from 2 to 3 percent every month. There will be a 30 to 120 days period to make payments. If you would like to find out how supplier finance works, there’s more info here.
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.
Whether you believe it or not, this form of financing is more convenient to use in comparison to conventional financing options similar to bank loans given that you meet the requirements asked. Fact is, there’s more info here that can help you out.
There are various benefits that supplier financing can provide to a business and if you wish to learn about it, keep on reading.
Number 1. Long term payment – in paying the goods back, your financier will allow you 4 months to pay for it. 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 the business world wherein money has competing needs, making a direct payment ensures that the cash will 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 – if you can make payments earlier than expected, then your financier can give you discounts. 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 can actually obtain more info here.