Business line of credit for small business

Supply chain financing: If your business needs inventory then does it need supply chain financing?

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Need Supply Chain Financing: If Your Business Needs Inventory

Businesses have demands for their capital in all areas. Payroll to cover the demands for staff, to marketing to drive sales, to inventory and supplies to keep products on hand. Let’s not forget the other soft cost associated with running a business along the way. All of these expenses go hand in hand and are crucial, thus leaving the small to mid-sized business owner stuck in a proverbial catch 22.

You cannot save on employees to spend on marketing. If so, then you will not have the staff on hand to deal with the demand your marketing efforts will hopefully bring. On the flip side, you cannot just stock the shelves and not spend on marketing or staff. If you do so, then how will you drive traffic to your product? Again, how will you work efficiently while short-staffed?

Therefore, businesses can and should take advantage of every option to ease one of its burdens every chance it gets.

To my knowledge, there currently is not a business financing product that is designated specifically for payroll needs or to fund companies marketing efforts.

However, there is a product on the market that can assist a small to mid-sized business, with the capital constraints associated with keeping inventory and supplies on hand to meet customer demands. The product is a potentially wonderful business financing tool called Supply Chain Financing or SCF for short. Let’s take a look at what exactly Supply Chain Financing is and how businesses utilize it.

Supply Chain Financing is a business financing product that allows businesses to finance their supplies and inventory demands, instead of ordering its supplies or inventory from a vendor supplier along with paying for goods upon delivery. Utilizing Supply Chain Financing gives a business the same buying power of a big box retailer, in the sense that it allows a business to now receive needed supplies and inventory on terms.

Benefits of Supply Chain Financing for Small Businesses

Better Stability for Suppliers

Supply Chain Financing makes it easier for you to make payments to suppliers on time. It does this by
allowing a business to draw money from a separate credit fund that has been furnished by an investor. If
a supplier requests you to make an early payment, you can do so using this fund after negotiating a
discount. Supply Chain Financing, therefore, allows your business to ensure that its suppliers can
continue to provide high-quality services. The best part is that you can offer financial support
without having to spend any extra cash.

Outgoing Payments Can Be Deferred

Another one of the benefits of supply chain financing for small businesses is that you can use it to strengthen your own working capital as well. Since supply chain finance allows you to make outgoing payments from the credit fund instead of your business accounts, your working capital is not cut as soon as payments become due.

Improves Your Business Credit Profile

Besides improving your cashflow in the short-term, supply chain financing can also provide long term benefits to your business. It does this improving your business credit profile. Having a strong business credit profile allows you to access financing tools like major loans. Having a good business credit profile is harder than having a good personal credit score. This is because a business credit profile not only evaluates your credit history, but it also uses general information regarding your business and also checks your business relationships with financial institutions and suppliers.

Since supply chain financing allows you to use an external credit fund, and you make all your payments on time, your business relationships fare better. Over time, this helps you have a stronger credit profile.  Now that we’ve introduced what Supply Chain Financing is and what its benefits are, let’s set up a scenario for you to look at:

An Example to Visualize

Let’s say a car Tire Retailer orders tires to sell to customers and pays for those tires upon delivery. The Tire Retailer can now use Supply Chain Financing to order the tires, stock their shelves, and be ready to sell to their customers instead of paying for the tires upon delivery. Additionally, the Tire Retailer would have needed to spend money on marketing to promote the tires and staff to sell and install the tires. 

Now, the Tire Retailer can have the tires delivered to their store and use Supply Chain Financing to pay the vendor/supplier and then pay for the tires on terms to the Financing company from the net 15 business days all the way out to net 60 business days. This would now allow the Tire Retailer to redirect the funds that would’ve been spent on Tire Supply, over into other areas like bigger and better marketing to sell the tires or perhaps extra employees to sell the tires.

To wrap things up, it’s important to understand that timing is everything in business. If your business is expanding quickly and you cannot keep up with demands needed for customers, utilizing Supply Chain Financing would give your business the opportunity to conveniently finance supplies as needed.

As long as your business can finance supplies affordably at your request, your ability to market and increase cash flow will continue to grow. If you would like to further explore into Supply Chain Financing options, consider contacting a commercial bank or a private lender who can guide and assist you.

About AmeriDream Capital | Kris Henry

Kris Henry is a representative from AmeriDream Capital. AmeriDream Capital is a full-service business financing firm catering to small to mid-sized business all over the world. A representative could help guide and assist you if needed. If you have any detailed questions, please feel free to visit additional information.

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