- 09 Oct
How To Increase Your Buying Power
If you are in a position where you could accept more orders if you were able to buy more goods, you may want to know how to increase your buying power. We have a solution called trade finance, a financial service that allows you to buy goods by bridging the cash flow gap between paying your supplier and receiving payment from your customers.
You may even be able to negotiate pricing discounts with suppliers if you have access to additional purchasing capital so that you can pay on cash terms, or buy in larger quantities.
How Trade Finance Works
The way the service works is that you order goods from your supplier (they can be based abroad or in the UK). the finance house guarantees payment by way of a Letter of Credit or Supplier Undertakings. Once your supplier makes shipment of the goods, agreed documentation is provided to the finance house, who will make payment to your supplier under one of those financial instruments mentioned above.
How It Is Repaid
After you receive the goods you can either repay the finance from your own funds or you can link your trade finance facility to a factoring arrangement, such that the factoring will repay the trade finance. The factoring also helps you collect in the payments from your customers which eventually repays all the finance and allows you to earn your profit margin on the shipment.
The benefits of this kind of purchase finance facility are that:
- You have increased buying power. Your suppliers are paid at the point of shipment so you can sell to your customers with the confidence of knowing that you can fulfil their orders.
- Increased business potential. You don't have to turn orders away because you can't afford to pay for the goods.
- Peace of mind as you will have access to an experienced support team that can help with complexities such as paying Duty, VAT and freight forwarding fees. This can help your business run smoothly.
- Competitive exchange rates as the financiers can provide you with Foreign Exchange services to fix the exchange rates for you, if you are purchasing in currency.