‘Just-In-Time’, or Just Late? – We Can Fund Your Supply Chain

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A supply chain blog hardly needs any introduction or context at the moment – you cannot turn on your TV, head to the supermarket or go to get petrol without having the issues front and centre in front of you.

Of course the majority of UK businesses aren’t in the petrol forecourt business or the supermarket game – BUT the issues around delays and inflated costs in supply chain are affecting virtually every UK company.

The UK supply chain landscape is suffering some chronic issues:

·       Costs increases in energy, raw materials, parts and stock can’t always get immediately passed on to customers

·       Staff shortages widespread in food processing, retailers, agriculture and hospitality to name just a few sectors

·       Wages for new hires and temporary staff spiralling, poaching and hiring bonuses prevalent

·       A shortage of drivers in logistics, and the cost of haulage and freight transport at record levels

·       Covid case levels stubbornly stuck in the mid to high 30,000’s daily for the third month

If major firms (with presumably deeper pockets than the average business) are restricting trading operations, imagine the effect these issues are having on SMEs broadly in the UK and the drain on their cash flow from long delays and far higher costs.

Your company needs suitable funding that fits in to the cycle of business and trade that you are doing.

·       Using cash for supply chain in this environment is not sustainable.

·       Taking a business loan to finance your supply chain just puts fixed payments immediately into the calendar – and you are probably starting to repay before you have been able to receive payment from end customers.

We help UK businesses fund their supply chain from within the UK and overseas with Supply Chain Finance and Trade Finance, and wanted to lay out how broadly it can help business in a variety of sectors in the UK economy – especially at the moment.

How can Supply Chain Finance and Trade Finance help you?

Let’s lose the common misconception first – Supply Chain and Trade Finance can be for stock, materials or goods sourced within the UK, as much as it can be used the purchase of raw materials and finished goods or parts internationally.

Trading with suppliers or manufacturers can begin with either an order from a client that you have to fulfil, or having to ‘stock up’ on the goods that you sell because your customers will expect a quick delivery after they make a purchase.

Depending on the nature of their business, companies either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier – packaged and ready for delivery to their customers.

How can the finance be used?

Supply Chain and Trade Finance can be used to fit a wide range of business types:

·       Purchase raw materials or finished goods

·       Trade can be with UK based companies as well as overseas

·       Commonly finance companies are also experts in FX

·       Goods can be pre-sold, or to provide a stock for sale

Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier; Supply Chain or Trade Finance facilities can be flexible to accommodate deposits if required on order, and other costs including import VAT and freight / haulage if these are applicable to you.

Is the cost of taking finance justified for your business?

In the current environment companies need to conserve cash within the business as working capital can become strained without much notice.

Funding the purchase of goods or materials that are either pre-sold or to provide you with stock leaves crucial cash in the business to cover overheads and unexpected cash calls on the company.

This is especially true when supplementary costs like transport or freight may now be a multiple of what you had first budgeted for when pricing the project or order.

A common objection to arranging finance is the cost of the facility and funding these transactions; beyond the fact that lenders that we work with offer extremely competitive rates on their facilities, I would suggest that these are a great example of the ends justifying the costs of the means. 

The cost of funding will slightly reduce your margin on the transaction – but with very little effect on working capital, and consequently you are still able to meet other demands that you face – as well as to fulfil any opportunities that are presented to you.

If you buy materials or goods in the UK or from overseas, don’t let that be the reason you cannot accept new business or orders, or take up any new opportunities.

Why not get in touch and discuss how we can support you with suitable Supply Chain or Trade Finance options?

How do you want to be supplied?

Mark Grant, October 2021.

info@fiduciacommercialsolutions.co.uk  / 01636 614 014