Business owners who already have a facility like debtor finance typically will consider if their limit size is appropriate for their business over the next few years and source the cheapest rates and fees they can.
You should be looking at these metrics and obtaining the best value for money but a consideration that’s often missed is a review of the finance structure.
Our client came to us with a small trade finance limit of $500,000 with up to 90 day terms and a debtor finance limit of $2M at their existing lender. Looking at their product and cash flow cycle, we identified that $2M Trade finance facility with 180 day terms could be sufficient without the need for any debtor finance facility beyond the initial refinance.
With no line or service fees and a low interest rate this dramatically reduced the cost of finance in the business and translated to a forecasted year on year savings of $95,000 pa.
Another Example: A Limit Increase With Lower Costs
A wholesaler supplying national retailers came to us after their debtor finance provider knocked back a request for a higher limit. Revenue had grown 20% under the current market conditions, and they needed a modest increase to support that growth.
After reviewing their business results and existing facility, we were able to justify the limit increase and also negotiate lower management fees and interest rate costs. The result was more cash flow support when needed and more profit on the bottom line.
Restructure Your Working Capital on Longer Terms
As this case study shows, longer trade finance terms can give you more time to sell stock before repayment falls due. Send us an enquiry and we’ll review your facilities and compare restructure options.
