All businesses need working capital to fuel growth. When considering a supply chain finance program to improve liquidity, importers tend to raise the same questions. We thought we would share some insights on the topics that are on the minds of growth-conscious buyers.
1) How long are my payment terms for a supply chain finance program with Harbor?
Harbor’s supply chain finance program provides up to 120 days credit to buyers. Under this arrangement, suppliers are paid upon the shipment of goods and the buyer is given an opportunity to improve their accounts payable days (DPO). This optimizes the cash conversion cycle (a measure of how long input is tied up in production and sales before it is converted into cash received).
Example: Harbor provided a supply chain finance facility for a wool importer and manufacturer in the U.S. The company primarily imports from the United Kingdom, Turkey and New Zealand and sells to Canada and Europe.
With the program in place, the buyer is able to procure goods on open account terms with its overseas suppliers, with net 120 day credit. Additional time to sell goods before payment is due to the supplier has led to improved cash flow, enabling the business to meet demand for their products and focus on customer acquisition and expansion to new markets.
2) I already have bank financing in place; Can I utilize supply chain finance?
Yes. Harbor’s program does not interfere with existing financing arrangements and can work as a supplement to other types of funding such as bank lines of credit and asset-based loans. Unlike other lenders, Harbor does not require collateral. Instead, the facility size is determined by the credit profile of the buyer.
Example: A popular U.S. brand of hardwood flooring was limited by their bank asset-based line of credit because of ineligible receivables and low inventory advance rates. Harbor was able to supplement their ABL financing with a supply chain finance program, allowing for additional liquidity to boost inventory.
3) Do you have to underwrite and approve my suppliers?
No. Our supply chain finance program only requires underwriting on you, the buyer. We request your company’s financial statements and promptly provide a credit limit. This limit can be used to pay suppliers of your choice after a simple and fast paperless onboarding. Suppliers are onboarded through a self-registration on the HarborTrade system, without signing any contracts. Supplier onboarding and due diligence is non-invasive.
Example: A large U.S. based distributor of fishing and sporting equipment has many suppliers, including four smaller suppliers in Vietnam and India. The buyer has a supply chain finance program in place with a bank, however the bank would not approve these smaller suppliers because carrying out KYC and AML protocols is labor-intensive and cost prohibitive. The buyer applied for a supply chain finance program with Harbor and was provided a credit limit within 48 hours. The remaining suppliers were onboarded the same week and both the buyer and supplier began benefiting from improved working capital.
4) Why Harbor and not another supply chain finance provider?
Harbor provides buyers with a more streamlined approach to vendor and procurement management. With the HarborTrade platform, buyers can initiate orders and track fulfilment and payments in one easy-to-use paperless system. HarborTrade allows for improved communication between buyer and supplier. Traditionally trade finance platforms and procurement technology were only available to large corporates, but Harbor brings these efficiencies to SMEs. Although we are tech-savvy, there’s always a dedicated account representative standing by to provide excellent customer service to our clients.
5) How much does it cost?
Of course buyers want to know Harbor’s fee structure. Harbor pays suppliers 100% of the invoice value upon shipment of goods. After a predetermined timeframe of 30, 60, 90 or 120 days, the buyer pays Harbor the invoice total plus a fee. Fees can also be absorbed by suppliers through an invoice discount or cost of goods reduction. The fee schedule is determined based on the credit worthiness of the buyer and volume being traded.
Contact us today to set up a demo of the HarborTrade platform and learn more about how Harbor can provide your business with additional working capital and administrative efficiencies through our supply chain finance program.