What is Supplier Finance?

Supplier Finance

What is Supplier Finance?

Supplier Finance is a revolving credit facility that allows supplier invoices to be paid on time and then offers an additional 90 days of credit before the facility needs to be repaid. It can be an excellent source of working capital. Let’s take a look at how it works and the benefits of the facility:

 

How does supplier finance work?

 

Step 1 – the application process is quick and easy and requires basic business information such as accounts, bank statements, aged debtors and aged creditors.

Step 2 – a limit is offered to you that will be a cap on the revolving facility.

Step 3 – suppliers are set up on the system so that you can make payments to them.

Step 4 – supplier send you their invoice as normal.

Step 5 – the invoice is paid via the supplier finance facility.

Step 6 – you repay the facility on the agreed date (up to 90 days later)

 

The benefits of supplier finance:

 

It typically requires no personal guarantees or business security.

 

This means that a supplier finance facility can sit alongside existing banking facilities without impacting on the security.

 

It can sit alongside invoice finance facilities to provide additional working capital.

 

It is an excellent substitute for trade finance or stock finance.

 

You can take advantage of settlement discounts from suppliers you choose which invoices you want to settle.

 

You only pay for the facility when you use it so it is a great source of top up funding.

 

Seasonal businesses can use it without fear of running out of working capital.

 

 

Supplier Finance Case Study

 

Our client is a manufacturer of cosmetics and in particular bath bombs. They have had huge success with online retailers in the UK. They were expanding in to the US and needed stock. By using supplier finance they were able to access £750,000 of working capital to allow them to purchase raw materials, manufacture their product and send stock to the US retailers. The facility was quick to set up and simple to operate. It sat alongside their existing finance facilities and as it required no security it did not disrupt the existing security requirements of other lenders.