Stock or Trade finance is a funding mechanism designed to assist in the purchase of stock.
Trade finance is an asset-backed facility designed for growing businesses. It enables a business to increase its working capital by funding the operational cycle, i.e. from the time payment is made to a supplier until receipt of funds from customers, thereby leaving internal funds free for other - productive - uses, such as sales growth.
A business would typically require stock or trade finance to grow stock levels in order to deal with increased sales and business activity, to take advantage of price increases, or to ensure efficient key stock item levels.
It is typically a layer of short-term finance over and above conventional banking finance and increases your business' flexibility to manage growth through the purchase of additional stock.
We carefully develop it to match your company's cash flow cycle, to alleviate the strain caused by increased turnover. It applies to local procurement as well as imported products.
Local payments are made by electronic funds transfer, or through the establishment of a local letter of credit or guarantee.
Each payment made by Merchant Factors on behalf of a client will have an agreed repayment date. The repayment date is set according to your working capital cycle, allowing you sufficient time to receive the goods, sell them, and collect the cash from the sale or through the debtor created as a result of the sale. During the facility's life, Merchant Factors will require monthly financial reporting, and will actively engage with you in an ongoing relationship.
Benefits of stock or trade finance
- Increase in sales and profits.
- Development of new product lines.
- Purchasing advantages by being able to buy in larger quantities.
- Purchase discounts through prompt payment of suppliers (discounts and increased profits should more than offset our charges).
- Available funds for special opportunities, emergencies and seasonal peaks (costs are only incurred when the facility is used).
- A more competitive position for you in the marketplace.
- An improved standing with suppliers and customers.
- Since we in effect become your partner, you have the added advantage of our expertise, which will benefit the smooth operation of your company.
- Cash for expansion.
- Increased sales.
- Increased margins and improved credit rating
- Saved management time.
- Reduced overheads.
- Improved return on capital.
- Expansion without loss of equity or control.
How stock or trade finance works
- You notify us of the details concerning payment to your supplier.
- We draw up a letter of credit or arrange for payment to be made directly to your supplier.
- Subject to pre-arranged terms, we allow a credit period for payment of up to 120 or 180 days after shipment.
- Payment is generally made to us by bills of exchange accepted by you.