Supplier financing can provide the credit that your company needs to buy goods and raw materials from your suppliers. It helps manufacturing companies, distributors, and product assembly companies that need to fulfill large orders or build inventory.
Grow the business. Handle larger orders
If your manufacturing company growing? Are you trying to fulfill larger purchase orders or build inventory? Growing can be a challenge, especially if you are approaching your trade credit limits with suppliers or are reaching the limit of your line of credit.
You can solve this problem with supplier financing. It is a trade credit facility that enables you to buy raw materials from your suppliers. In turn, you can fulfill large orders, grow your inventory in anticipation of growing demand, and expand your company.
How does supplier financing work?
The solution is relatively simple and operates as a form of trade credit. A supplier financing company acts as an intermediary between your company and your key suppliers. When you need to buy raw materials (or products), you place a purchase order with the supplier financing company.
The supplier financing company extends credit to your company, and places a corresponding purchase order with your supplier. Your supplier handles production and delivery of the goods and issues an invoice to the supplier finance company.
The supplier finance company pays your supplier, and then issues an invoice to your company. Your company has up to 120 days to pay the invoice, at which point the transaction settles.
Small and midsize companies
Most financing solutions for the supply chain are offered to large companies who, in turn, offer some accommodations to their suppliers. Our solution is different. We work directly with small and midsize companies that need resources to pay their own suppliers.
The qualification requirements for supplier financing are simple. To qualify, your company must:
- Be a manufacturer or product supplier
- Be credit insurable by Euler Hermes
- Be based in Canada (or the US)
- Sell a minimum of $2,000,000 per year
- Have at least three (3) years of operations history
- Provide accurate financial statements
- Have product liability insurance
- Have existing and working relationships with suppliers
Works with your existing financing
Supplier financing is compatible with most financing solutions because it does not encumber any assets and, thus, does not require an inter-creditor agreement with your existing lender. If you do have bank financing, verify that your covenants do not include this type of trade receivable as part of your debt calculations.
The cost of supplier financing varies based on the size of the transaction and credit characteristics of the client. Costs range from 2% to 3% per 30 days.
If you need additional information, read:
Supplier financing quote
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