How Supplier Finance Works

Containing costs and carefully managing cash flow is critical for small business sustainability and success. Supplier Finance is a useful tool to help with cash flow management.

Supplier Finance works like this: you buy the stock or raw materials from a supplier on a 30, 45 or 60-day account instead of paying cash. You then produce the finished products, sell them to clients and collect payment from them in time to pay the supplier.

Large suppliers have formal processes in place to vet applications for supplier credit (i.e. 30, 45 or 60-day accounts). They will check your credit rating and may also contact your bank for details on how the bank rates your account. You’ll need to give them trade references that they can contact to check your payment history. If you need to buy a large amount of stock on credit, they could request your business’ financial statements and balance sheet, as well as your personal assets and liabilities statements.

Approach your key suppliers and take advantage of Supplier Finance; it can make a big difference to your business’ financial well-being.

To read more about supplier finance, visit https://www.finfind.co.za/understanding-supplier-finance