TRADE & IMPORT FINANCE
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Trade & Import Finance
Trade and import finance is a line of credit to be used for the purchase of material goods.
It works for all business types whether you’re purchasing goods domestically or from overseas.
With up to 180 days it gives longer terms than suppliers offer.
You could add the 180 days to supplier terms to have an even longer benefit.
You could use it to pay COD and negotiate a discount from your supplier for upfront payment.
You could use it on top of credit limits that suppliers might offer if you’ve got more work on or a particularly big job.
When you’re not using the product there’s no cost to having the facility.
It saves you from using your cash in the production of your product which means you can do more with less.
This makes a business more resilient.
There’s no charges if you’re not using it. It sits there as a backup and allows you to take advantage of larger custom orders and special opportunities. This means you can preserve cash for things like wages and other non material inputs.
This protects business cash to improve production output meaning you can keep your business revenue performing stronger.
Restructuring working capital for longer terms and increased profitability
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.