All businesses need working capital to stay afloat. Those involved in international trade are often faced with liquidity challenges both up and downstream in the supply chain. The buyer needs to pay the supplier upfront but faces deferred payments downstream when selling to customers, thus lengthening the cash conversion cycle. This is where Supply Chain Finance programs come to the rescue.
Supply Chain Finance programs are increasingly being implemented across the globe due to the working capital benefits to both buyers and suppliers and the rise of new providers and platforms.
With Supply Chain Finance, a provider like Harbor pays the supplier when the goods are shipped and extends credit to the buyer, giving them the opportunity to sell the goods before payment is due. The supplier is happy to receive prompt payment for the sold goods and the buyer benefits from optimized cash flow.
There are a number of different options available for Supply Chain Finance providers, so how do you find the one that’s right for your business? Generally, there are two types of Supply Chain Finance providers: banks and non-bank lenders.
Banks are typically not a good fit for most middle market companies looking for Supply Chain Finance for the following reasons:
- Banks prefer to work with large, rated companies with annual revenues over $1 billion
- Complex and time consuming procedures for onboarding both the buyer and suppliers
- Not all suppliers qualify for the program due to minimum spend or supplier location
Instead, middle market businesses tend to work with non-bank Supply Chain Finance providers which offer less rigid qualifying criteria and easier onboarding for the buyer and suppliers. When selecting a non-bank provider, it’s important to understand their capabilities and limitations as it applies to your particular business. While rates are fairly comparable from one trade finance provider to the next, there are other factors to consider such as flexibility, convenience, customer service and efficiency.
Each non-bank Supply Chain Finance provider also has a set of requirements for the businesses they can work with such as:
- Industry type
- Annual revenue
- Credit score and financial position of the business
Harbor is a popular choice for non-bank Supply Chain Financing as they have effectively streamlined the entire buyer/supplier experience through their online HarborTrade platform.
Advantages to working with Harbor:
- HarborTrade platform simplifies the procurement and payment process. Clients can initiate orders, view and track shipments and pay invoices in one easy-to-use system.
- Harbor offers up to 120 days to pay suppliers instead of the standard 30 to 60 days, creating even more working capital for the business.
- Fast approval and onboarding for new buyers and suppliers.
- Harbor allows you to keep your existing financing arrangements such as term loans or lines of credit.
- Unsecured, non-invasive trade credit. No collateral required.
- The program works like a virtual credit card – pay suppliers of your choice.
- Harbor works with most industries and suppliers in almost all jurisdictions around the world.
- Improved communication with buyers and suppliers on HarborTrade platform.
- Clients have a dedicated account manager always available to provide support.
For more information on Supply Chain Finance with Harbor contact [email protected].