Companies everywhere depend on working capital to keep their business afloat and as a means to pay for new developments and growth. When cash flow is not consistent due to fluctuation in sales, product seasonality or other factors that can cause cash levels to dip, businesses opt for financing which can keep things on track.
For businesses involved in trade, Supply Chain Finance is a popular choice and it’s changing the way buyers and suppliers do business. We’ll explain why Supply Chain Finance is a big deal and how it’s benefitting buyers all over the world.
What is Supply Chain Finance?
Supply Chain Finance is a specialized type of working capital program whereby a finance provider such as Harbor Trade Credit pays the supplier when goods are shipped to the buyer, then extends credit to the buyer for a predetermined length of time. When the buyer can sell goods to their customers before a payment is due to the finance partner, their cash flow improves.
Suppliers also benefit from Supply Chain Finance because they receive prompt payment in full when they ship goods, instead of having to face payment delays or needing to extend credit to buyers.
In simple terms, a Supply Chain Finance program offers short-term credit so that the buyer and supplier can make the best use of working capital.
Why is Supply Chain Finance Important?
Think of it this way: the global supply chain is expanding throughout the world. On one side, there are international buyers, and on the other, a group of distinct suppliers based in different countries. In every case, buyers want to lengthen their payment terms with suppliers, while suppliers are looking to get paid as soon as possible. Despite both parties having contrasting interests, a suitable supply chain financing program allows them to align.
Harbor Trade Credit’s Supply Chain Finance program pays suppliers promptly, while allowing the buyer up to 120 days to pay. The result? Both parties benefit. While suppliers get a boost in working capital, buyers tap into improved cash flow. As an added benefit, risk is reduced through the supply chain since the finance partner assumes the risk of nonpayment.
How Does It Work?
Harbor Trade Credit makes setting up a Supply Chain Finance program easy and fast with just a few steps:
- The buyer submits an application form and financial statements to Harbor Trade Credit.
- Harbor determines a credit limit for the buyer ranging from $200,000 to $8 million.
- The buyer can use the limit to pay suppliers of their choice, using the online HarborTrade system
- All payments, shipment notifications and communication between the buyer and supplier can be viewed and tracked on the HarborTrade system.
Who Uses Supply Chain Finance?
Importers, manufacturers, wholesalers, distributors and brands are all using Supply Chain Finance. Businesses qualified for a program with Harbor Trade Credit have a good credit rating and do somewhere between $10 million and $200 million in annual revenue.
Many businesses already have financing in place such as a bank line of credit. What’s unique about Harbor’s program is that businesses can keep their existing financing arrangements and benefit from even more working capital. Collateral is not required for the program.
How Does Supply Chain Finance Benefit Buyers?
When buyers set up a Supply Chain Finance program with Harbor Trade Credit, they benefit in all kinds of ways.
Improved Cash Flow
The most important benefit to a Supply Chain Finance Program is the addition of working capital to the business. Harbor Trade Credit gives the buyer up to 120 days to pay for their purchased goods.
Think of all the ways having more working capital can benefit your business growth strategy. From hiring additional employees or enhancing your marketing initiatives, to expanding your warehouse space, there is a lot that can be accomplished when a business has more cash.
Streamlined Business Processes
With Harbor Trade Credit’s online platform, clients can initiate orders, view and track shipments and pay invoices in one easy-to-use, paperless system.
When buyers pay their suppliers at sight, they gain an advantage when negotiating their cost of goods. A lower cost of goods means a higher profit margin for the buyer.
Ready to Grow Your Business?
Call Harbor to learn more about our Supply Chain Finance program and how you can begin.