Product Sourcing Business and Importer
Our client is a sourcer of manufactured products and has offices in Hampshire, London and China. This means that they have staff on the ground in China that work closely with manufacturers ensuring the best products can be sourced at the best prices for their clients.
Clients ranged from small owner managed businesses right through to our favourite multi-national coffee chains. In fact they source the paper cups your take away coffee may come in and also the travel mugs people often carry in their cars branded by the coffee chain.
They had almost become victims of their own success because as turnover had grown and large orders had been secured cash flow had become an issue. Their manufacturers in China required substantial deposits or to be paid by a letter of credit for these substantial orders. This issue was only compounded by the fact that larger customers were dictating longer payment terms.
As a result of the cash flow issues they were encountering our client’s growth was severely restricted.
They had approached their own bank only to be turned down for both factoring and trade finance due to the large concentration of debt with the large multi-national blue chip coffee chain. This was frustrating as it was a client that they had worked hard to secure and it was also their best rated customer.
We looked at their business so that we could fully understand their processes. We discussed their requirement and also their potential options. From there we submitted reports to suitable lenders and managed to secure two offers of import finance. This is a combination of invoice factoring and trade finance that allows suppliers to be paid by letter of credit and the transaction is financed right up to the end customer paying. We worked through both offers to ensure that there were no funding restrictions and then analysed the costs.
The two offers were the same in terms of facility size and structure. The headline rates were also pretty much identical. However, when we analysed all the costs involved based on certain assumptions one facility was 30% cheaper than the other.
By using Funding Solutions to source their cash flow solution they ended up with a working capital facility that finances their entire trade cycle. Importantly it is structured to accommodate the large concentration of debt with their major customer. Costs have also been minimised to provide the most cost effective facility available which also maximises profits given the circumstances.
The client has since secured a large multi-national catering supplier as a new customer and continues to grow from strength to strength.