Lending to Support Food Services Business Stock for Christmas

Young worker in sterile cloths measuring healthy food snacks before packing them.

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With Christmas around the corner we’re seeing activity ramp up for the food manufacturers and food wholesalers and understandably so at this time of year. It’s important to have the capital to stock up for what’s about to happen.

More than 100,000 people attend and purchase more than 700 tonnes of seafood at Sydney Fish Market’s Christmas seafood marathon. Stats like that are replicated all over the food industry over the holiday period and it’s key that suppliers have enough inventory to pack shelves and capitalise on the once a year bonanza. If they don’t they risk missing out on one of the most lucrative times of the year.

What if I’m a food supplier who doesn’t have the cash reserves or capital?

There are a number of finance solutions that can support a business: 

Trade Finance is a line of credit that is used to pay suppliers. The lender pays your supplier and you repay the finance over a term that’s normally up to 120 days. There are both domestic and import products available and it’s crucial to make the correct lender solution to ensure you have terms that support your sales and distribution cycle.

Debtor Finance is a line of credit that works in the same way as an overdraft – ie a business will have a pre-approved limit and can drawdown funds as they need at their discretion. Debtor finance allows you to raise up to 85% of an invoice value and use those funds for any business purpose. Businesses will typically use debtor finance to cover everyday business costs such as wages and operating costs which makes it a perfect support mechanism to help get your product to market.

Taking advantage of equity in Equipment or Machinery. Simply put, a lender will loan you funds, secured by the asset you own and then you can repay the amount over an agreed term of 3, 4 or 5 years. It’s an excellent alternative for those businesses that are conscious of margin and can be used on older assets that still have a useful working life.

And of course there’s unsecured lending. An unsecured business loan is a short-term facility that gives you access to funds that can be used for any business-related expenses. Terms range from 12 months to three years and loan amounts can be from $5000 to $500,000. A debt to the ATO is not an obstacle and funding can be achieved as quickly as 24 hours from application as financials are usually not required.

Picking the right option is important to ensure you can capitalise on the market and match your sales cycle. If you’re business is a retail model selling direct to the consumer all options above are available to you except debtor finance. In it’s place a business overdraft as a line of credit can perform the same function. These days you don’t need property to secure an overdraft as there are lenders offering this form of credit to business owners who rent or are not wishing to put the family home on the line.

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