Also known as working capital finance, trade finance is often used as a bridge between a business that has the potential to borrow and the stock they need to sell to clients.
In either export or inventory financing, borrowers will need to provide details of purchase orders to support their loan submission. This and any other supporting documents are typically essential to getting funding for manufacturing and shipping to clients. In terms of import and inventory financing, the services are typically short-term and fit the working capital cycle of the borrower.
Additionally, in either type of finance, lenders will often fund the purchase of the stock and demand that the repayment be settled by the end of a short period of time. These loans usually have fairly short terms that suit the business’ working capital cycle, which in most cases, is somewhere around 90 to 120 days. Also, borrowers will often have to be clear on what stocks they want to buy, even if they don’t have purchase orders from clients just yet.
- Security details
The client operated a manufacturing company in regional South Australia, and they offered outstanding debtor invoices, known as factoring.
- What did the client want?
The client was experiencing cash flow issues due to his creditors delaying overdue payments. He was looking for a solution to cover a shortfall in cash flow.
- Key details
The most ancient form of lending. In either export or inventory financing, borrowers will need to provide details of purchase orders to support their loan submission.
- Difficulties along the way
The lender asked for specific accounting information that was not readily available, which created delays and caused frustration for all involved.
- What did we do?
We interacted with the client’s tax advisors to assist in collecting the relevant documents.
- The end results
The lender approved finance and our assistance made a tremendous impact on their business.