WE ARE A FULL-SERVICE BUSINESS FINANCING FIRM WITH CONSULTANTS
THAT SPECIALIZES IN SUPPLY CHAIN FINANCING
What is Supply Chain Financing?
Supply Chain Financing is a set of Asset Based Lending business products funded by lenders that optimizes different aspects of a company’s Supply Chain. Supply Chain Financing generally covers two products Supplier Financing and Reverse Factoring.
The goal of both asset-based lending products is to help lengthen a company’s payment terms either as a buyer or as a seller within its supply chain cycle. Supplier financing is a form of funding pre-delivery and reverse factoring is a type of post-delivery financing product.
What are the two main types of Supply Chain Financing products that we focus on:
Supplier Financing
Reverse Factoring
What is Supplier Financing?
Supplier Financing is one type of Supply Chain Financing; it is an asset-based lending product that is funded by lenders to businesses that aid them in growing the level of new products and inventory. This product helps companies cover supplier expenses and enables companies to buy more goods from their supplier.
Which, in turn, can use these products to deliver larger orders or build inventory. With Supplier Financing, companies can convert their regular capital expenditures for supply to invoice payment terms that can go out to up to the net 60 business days. Companies can then divert the capital they would otherwise spend on new inventory from their suppliers towards other areas of the business.
Supplier Financing can work with most companies that amass and resell as inventory and supply including but not limited to: Retailers, Wholesalers and Distributors.
Supplier Financing is an asset-based lending product funded by a lender that provides business with a Trade Line of Credit.
A company then works with the lender as a partner that helps to manage purchases between the company and its largest suppliers using the Supplier Financing Line as the borrowing base.
When the company needs to purchase additional products, they place an order with the Supplier Financing lender. Once the purchase order is received, the lender extends funds from the Trade Credit Line to the company.
Then they place the purchase order with their supplier. The company’s original supplier handles the manufacturing of the goods and delivers them to the company. The Trade Credit Line handles paying the supplier directly.
Once the company receives the products ordered, the Supplier Financing lender sends the company an invoice for the full value of the order, including a markup for the service. The company usually has up to net 60 business days to pay the invoice, at which point the transaction settles.
The cost of capital can vary from 1% to up to 5% for every 30 business days that the invoice is outstanding. Supplier Financing can help to free up cash flow for businesses, which they can then use to grow and expand. The capital that the company would have otherwise allocated towards the purchase of goods and products can be redirected into other areas of the business the company’s officer deem is a better fit.
For mid-sized to larger businesses that have established a solid base and are looking to expand and compete with larger companies. Eventually, a need to be able to build up inventory on credit terms like their bigger counterparts to compete will arise. Supplier Financing can help businesses fulfill that need and start to put them in the right place to grab market share within their industries.
Supplier Financing Trade Lines of Credit can offer up to 100% of the face value goods or products a company needs to purchase to be able to have on hand to sell to its customers.
Supplier Financing can also be used to build up inventory. Purchase Order Financing can not do that as each purchase or supplies must match a corresponding order. Therefore this product can provide more than just the benefit of buying supplies needed to fulfill purchase orders.
This product can provide liquidity to a company’s cash flow since it can extend the number of days to keep their payables outstanding to up to max net 120 business days. This can also help to streamline their administrative processes by having a lender co-manage their supply chain.
Supplier Financing can aid in keeping companies supply chains moving, which can help to strengthen relationships with suppliers.
Typically, companies receive discounts when they can place larger orders with their suppliers, which in turn can tend to lead to a reduction in the cost of their goods sold.
This product is not a loan; the Supplier Financing company is not providing direct funding to your business. Their goal is to finance just a company’s key suppliers that have credit insurance. Therefore, typically most lenders do not have any need to file a lien against any other assets.
Supplier Financing tends to integrate well with other financing products. However, as a precaution, each lender may have their covenants to ensure a company and its suppliers are compliant with any vendor credit clauses.
For a company to be able to qualify for Supplier Financing, the company must have an existing active distribution method to deliver their goods and products to customers, i.e., a brick and mortar store, b2b clients, or a robust online presence.
As well, the company needs to have solid existing and working relationships with their suppliers.
Also, the business must be able to meet specific qualification criteria that are including but not limited to: A company should be in business for at least three years of operating history under the same Fed ID #.
This product works better for mid-sized to larger-scale businesses with a minimum of $2,500,000 in annual sales and is credit insurable.
A company must maintain and be willing to provide reasonable financial statements for the last two business years.
Supplier Financing can only work for businesses operating within the US or Canada.
To qualify for Supplier Financing, a company may also need to have product liability insurance.
PARTNERSHIP YOU CAN RELY ON
Our goal is to be our client's trusted business financing partner from inception to the day they sell their business.
SEASONED BUSINESS CONSULTANTS
TGRP Business Consultants are here to offer our clients all of their years of experience in providing capital to companies to grow and expand.
What is Reverse Factoring?
Reverse factoring is an asset-based lending product funded by a lender that works between a Large Scale Company and its suppliers and commits to pay the company’s invoices to the suppliers at an accelerated rate in exchange for a discount. This business financing product can provide a solution that mitigates the adverse effects of longer payment terms to suppliers.
Reverse Factoring can help buyers and suppliers optimize working capital by linking the companies doing the buying and all the suppliers under one financial funnel, that manages the payment cycles between both parties. Companies can then redirect the efforts to manage payables to suppliers towards other areas of the business.
Reverse factoring is usually best for Larger businesses that are creditworthy and have a lot of suppliers to manage.
Reverse Factoring works somewhat differently from a conventional factoring arrangement. Reverse Factoring is an asset-based lending solution funded by a lender to large companies suppliers vs. the company itself.
When a company starts a Reverse Factoring agreement with a lender, the Supply Chain Financing lender providing the Reverse Factoring will intermediate the accounts receivable process for this company with all of its suppliers. This product will provide a funding solution that allows suppliers to a business to get early payment options on their net-30 to net-60 invoices.
The supplier pays a small fee for this service. The lender providing the Reverse Factoring would then collect the invoice from the business once it matures. For example, using Reverse Factoring, a supplier sends invoices to the buyer after delivering their products to the large company utilizing the product.
From there, the buyer approves the invoice and uploads the data to a tracking system that will record all transactions and payments going forward. At this point, all parties, including the supplier, the buyer, and the Reverse Factoring lender can access the system online anytime to see all approved invoices.
If the supplier chooses to do nothing, funds will reconcile on the standard maturity date by the buyer to the seller as usual. However, if the supplier decides to take advantage of the Reverse Factoring option, then they can sell their receivables seamlessly to the lender, providing the funding in return for early payment.
For all invoices traded before maturity, 100% of the invoice value, minus a small financing cost of the capital fee, is sent via ACH to the supplier’s bank account. Typically, the suppliers are paid the next business day. Since the funds from Reverse, Factoring is advanced based on the buyer’s promise to spend on the original maturity date, the financing rates and terms are based only on the buyer’s creditworthiness and not the supplier’s.
Just like with Conventional Factoring, this product will mature and closeout, once the buyer pays the full invoice amount. If the supplier did not sell the invoice, then the funds would forward over to the supplier. If the supplier did opt-in and use the program, then the funds would then be awarded to the lender of the reverse factoring program.
Retail Energy Providers
Wholesale Energy Providers
Renewable Energy Traders
Energy Trading Companies
Renewable Energy Providers
For a company to be able to qualify for Supplier Financing, the company must have an existing active distribution method to deliver their goods and products to customers, i.e., a brick and mortar store, b2b clients, or a robust online presence. As well, the company needs to have solid existing and working relationships with their suppliers.
Also, the business must be able to meet specific qualification criteria that are including but not limited to:
A company should be in business for at least three years of operating history under the same Fed ID #.
This product works better for mid-sized to larger-scale businesses with a minimum of $2,500,000 in annual sales and is credit insurable.
A company must maintain and be willing to provide reasonable financial statements for the last two business years.
Supplier Financing can only work for businesses operating within the US or Canada.
To qualify for Supplier Financing, a company may also need to have product liability insurance.
COMPETITIVE TERMS
We have custom-tailored options to meet a company's specific needs. TGRP works diligently to provide each client with funding terms that fit their goals.
EXPERT SERVICE
We pride ourselves on going the extra mile for every client that we work with and excel at delivering the capital they desire to grow their business.
Standard Interest Rates or Cost
Rates Start at 1.5% for the 1st 30 days
Typical Underwriting TimeLine
5-10 Business days
Available Capital Limit
Up to $500M per Cluster of Invoices
Average Term Limits
12 to 24 Months
In closing, If a company is a mid-size to large scale business that is looking to grow and scale and wants to increase its payment terms to its suppliers, just like the more substantial corporations on the market can do. Then Supplier Financing can have some tremendous benefits to offer a competitive advantage to those businesses that utilize the product.
If a large company is looking for a way to streamline its payables to its supplier and at the same time reduce the cost of managing invoices and redirect that capital towards other areas of their business, then Reverse Factoring can provide a great deal of flexibility and credibility to a large scale company that takes advantage of the product.
Our lenders are incredibly knowledgeable in both products and are ready to serve our clients. Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize in providing clients with access to the best Supplier Financing and Reverse Factoring programs on the market.
Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow with Supply Chain Financing and will guide you through the funding process each step of the way.
