In the dynamic commercial landscape of regional Australia, a company operating in industrial insulation, cladding and roofing was on the brink of transformation. The company’s comprehensive service portfolio catered to a diverse range of industries, specialising in thermal insulation and fabrication. However, to stay competitive and meet the growing demands of their clientele, they needed to expand their operations and enhance their capabilities.
The key to unlocking their potential lay in securing adequate working capital finance. As such, the company sought a partnership with Octet to support their growth ambitions.
Boosting cash flow with debtor finance
Working with Octet’s Director of Working Capital Solutions, Dan Verdon, they identified debtor finance as a crucial component of their financial strategy that provided the company with the liquidity needed to manage their cash flow effectively. By leveraging their accounts receivable, they converted outstanding invoices into immediate working capital. This influx of cash enabled them to meet day-to-day operational expenses without delay, ensuring the smooth running of their business.
“The Debtor Finance facility was a game-changer,” said Dan. “It enabled the company to bridge the gap between invoicing and payment, reducing the stress associated with cash flow management.”
The initial requirement was for a $1.4m Debtor Finance facility. With steady cash inflow, the company could now focus on scaling their operations rather than worrying about payment delays from clients. It allowed them to tender for larger jobs, which triggered Octet to apply an immediate facility increase to $2.0m.
Empowering expansion through trade finance
Trade finance complemented debtor finance by addressing the specific needs of purchasing raw materials and equipment from suppliers. The $100,000 Trade Finance facility provided the necessary funds to secure critical inventory and equipment on favourable terms. This allowed the company to maintain a steady supply chain and meet the demands of their growing project pipeline.
By utilising trade finance, the business could negotiate better deals with suppliers, taking advantage of bulk purchasing and early payment discounts. This not only reduced costs but also ensured they had the materials needed to deliver projects on time and to the highest standards.
Dan states, “The client was particularly pleased with the unique feature Octet offered that enabled them to pay their current ATO debt through their trade facility.”
New investments in technology and equipment
One of the significant ways the company leveraged their working capital funding was through investment in state-of-the-art equipment and technology upgrades. The infusion of funds allowed them to purchase advanced machinery that enhanced productivity, efficiency, and safety. With cutting-edge tools at their disposal, the team could tackle complex projects with greater precision and speed.
These technological advancements positioned the company as a leader in their field, enabling them to deliver superior results to their clients. The ability to stay ahead of industry trends and continuously improve their service offerings became a competitive advantage.
Expanding the workforce and service offerings
Financing also played a pivotal role in expanding the company’s workforce. With the financial flexibility provided by debtor and trade finance, they were able to hire skilled professionals across various disciplines. The expansion of their team allowed them to take on more projects simultaneously, increasing their service capacity and ability to meet client demands.
Moreover, as market dynamics evolved, the company recognised the need to diversify their service offerings. The availability of working capital enabled them to explore new avenues and introduce additional services, such as asbestos removal. This diversification not only opened up new revenue streams but also made the company more resilient to market fluctuations.
Pursuing growth opportunities
The strategic use of working capital finance facilitated the company’s growth ambitions. With enhanced cash flow, upgraded equipment, and an expanded workforce, they were well-positioned to pursue larger and more lucrative projects. Their ability to deliver comprehensive solutions across various industries attracted new clients and strengthened relationships with existing ones.
Overall, the application of a Debtor Finance facility and a Trade Finance facility empowered the company to overcome financial constraints and drive business growth. By leveraging these financing options, they achieved operational excellence, expanded their service offerings, and positioned themselves as a dynamic player in the industrial sector.
“The story of their transformation serves as a testament to the power of working capital finance in unlocking a business’s full potential,” concludes Dan.
Grow your business with Octet
Via our Referral Partner Program Octet empowers businesses across a range of industries, including construction and engineering, manufacturing, transport and labour hire, offering innovative debtor finance and trade finance working capital solutions.
Speak to our team of working capital specialists to see how we can power your business growth today.
Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
Maintaining a healthy cash flow in an unpredictable economic climate is crucial for business resilience. Doing so ensures your business can meet its financial obligations and seize growth opportunities, but improving cash flow in business can be a challenge in many industries.
In this article, we provide practical information on business finance to improve your cash flow, helping your company not only survive but thrive in these more difficult economic conditions.
How to control cash flow in business
Cash flow is the lifeblood of any business, representing the movement of money in and out of the company.
Sam Ralton, Octet’s Director of Working Capital Solutions, VIC, TAS, SA, explains, “The importance of cash flow is the ability to pay for goods and services when they fall due. Profit is a snapshot of how much money the company’s earned after expenses, but that doesn’t mean that the cash flow is in a healthy position.”
In fact, many companies confuse high profit with good cash flow. While the two are somewhat intertwined, improving cash flow in business is much more about forward thinking, planning and strategy.
“In a growing business, cash flow management gets increasingly harder because although you may have good margins and you’re making a profit, there’s a lag in time before that money is available to you, and therefore the cash flow runway is restricted,” Sam explains.
Cash flow runways and forecasts
A cash flow runway is the period a business can operate before it runs out of money. Having a clear understanding of your cash flow runway helps you plan and ensures the business can cover its expenses for a set period.
Cash flow forecasts are equally important as they predict future cash inflows and outflows, allowing businesses to prepare for potential shortfalls. “Cash flow forecasts are a good tool and indicator of when your business can pull certain growth levers or, conversely, restrict unnecessary spend,” says Sam. “They’re essential to ensure you don’t spend money today that you may need in the near future.”
So, what are some practical strategies for managing your business cash flow opportunities and issues?
6 simple strategies for improving cash flow in business
Review pricing structures: Ensure pricing covers your costs and desired profit margins. Regularly review and adjust prices to reflect market conditions.
Increase sales: Implement more layered brand marketing strategies and explore new markets and product verticals to boost revenue.
Control expenses: Regularly review expenses to identify and cut unnecessary costs.
Faster payment collection: Implement stricter payment terms and follow up on overdue invoices promptly using appropriate accounting software.
Inventory management: Utilise technology to maintain optimal inventory levels, reduce any holding costs and free up cash.
Supply chain management: Negotiate better terms with suppliers to improve cash flow timings. Where it makes sense for your business model, early payments can sometimes create opportunities to discuss discounts with appropriate suppliers.
Debtor finance provides an instant cash injection by unlocking funds tied up in unpaid invoices. This liquidity helps cover operational expenses, supplier payments and even fund growth opportunities.
Sam advises, “Debtor finance can give you the cash flow required upfront. So if you need funds earlier, you’ve got the certainty of borrowing against your invoices rather than waiting for those payments to arrive under the original terms.”
Businesses that access debtor finance can execute more effective financial plans by better managing cash flow fluctuations and the uncertainty associated with extended payment terms or delayed payments.
Unlike traditional loans, debtor finance requires no personal assets as security. This flexibility allows you to access funds when you need them, without risking valuable assets.
Trade Finance cash flow benefits
Trade finance offers substantial cash flow benefits by providing a tailored line of credit that bridges the gap between purchasing and selling goods. This funding solution ensures that businesses do not have to tie up their cash flow in inventory that takes weeks to arrive, process and sell.
By introducing a financial partner, such as Octet, into the supply chain, businesses can access funds to pay suppliers immediately, whether they are local or overseas. This enables the business to maintain healthy cash flow, as they can repay the credit facility over time rather than having their working capital tied up in these often lengthy transactions.
Because you can set a competitive exchange rate for the transaction upfront, trade finance can also safeguard against currency fluctuations. This supports smoother and more predictable financial management and helps increase your business’ purchasing power.
Where to go for business cash flow solutions
Implementingeffective cash flow management strategies and leveragingworking capital finance products can help you confidently navigate economic uncertainties. But staying on top of business cash flow and utilising these strategies and products can be a complex exercise, even for the most experienced of operators.
That’s why seeking professional advice is often a good idea. Financial planners, accountants, commercial finance brokers and business finance experts can all provide valuable insights and tailored solutions. For earlier growth stage businesses, it’s really important to consult widely in order to find the most suitable cash flow advice for your unique business circumstances.
Keep your cash flowing
Improving cash flow is essential for business stability and growth. At Octet, we’re here to support your business at every stage, offering expertise and financial solutions tailored to your needs. Our working capital products are designed to help businesses in all industries manage cash flow effectively.
Our team can provide guidance on leveraging innovative supply chain finance solutions and tools to maintain consistent cash flow, crucial for sustaining and growing your business in these challenging conditions.
Contact us today for more information on how Octet can help your business thrive.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
Securing the right financial support from major banks is a common challenge for many businesses, especially those in industries requiring agility and tailored solutions. Traditional lenders often don’t address the specific needs and pressure points of these more complex business groups. Rising fees, rigid loan terms, and a lack of flexibility can stifle growth and operational efficiency, leaving businesses in desperate need of a more tailored approach to financing. This was the situation faced by this business consortium that operates across multiple industries, until they found a comprehensive working capital finance solution with Octet.
Struggling with financial constraints due to complexities of the business
In 2022, the directors of an interconnected group of companies, working across multiple industries, faced a daunting challenge. As new majority owners, they inherited several businesses struggling with cash flow issues and strained lender relationships. The relationship with their primary bank lender had soured, and rising fees from non-bank lenders compounded their financial woes. Two of their businesses, operating in the meat industry, demanded quick, reliable funding solutions, but their existing financial arrangements were not meeting their unique requirements.
The primary goal of the consortium was to gain more buying power and growth opportunities. They needed a financier who understood their business’ pressure points and could provide a comprehensive, tailored financing solution. Their business operations, particularly in meat wholesale, required a flexible approach due to the perishable nature of the products, which typically operate on shorter financing terms. Through their commercial finance broker, the directors sought a lender who could consolidate their multiple financing needs into a single, cohesive package.
Octet’s innovative supply chain finance: A flexible cash flow strategy
Enter Octet, with a bespoke working solution that addressed all of the business needs across the consortium. Initially working on a financing arrangement for one of the consortium’s operations, Octet was able to extend this to provide a comprehensive financing package that included a $4.25m debtor finance limit, $2m trade finance limit, and a $600k asset finance facility. This all-encompassing approach was designed to alleviate the pressures faced by the group.
Octet’s solution enabled one of the business directors to release the mortgage held over their home and terminate their trade facility with the bank. Additionally, by bundling all their financing needs into one package with Octet, the business was able to pay out, or reduce, the other remaining facilities with multiple non-bank lenders.
One of the most significant aspects of Octet’s solution was its tailored approach to the meat wholesale sector. Despite the industry’s challenging financing conditions due to the fast turnover of the products, Octet crafted a financing plan that provided the business with much-needed speed to market. This agility allowed the directors to secure supplier discounts by ensuring quicker and more regular payments, setting them apart from competitors.
Immediate and long-term benefits for the business
The impact of Octet’s financing solution was immediate and transformative. Within the first 24 hours of finalising the facility, the company was able to disburse $1.4 million in trade payments to their major suppliers. This rapid injection of working capital not only stabilised their operations but also enhanced their purchasing power.
The benefits extended beyond immediate financial relief. The new financing structure allowed the business to focus on strategic business planning and growth, rather than constantly managing cash flow issues. The agility provided by Octet’s tailored solution enabled the business to purchase more stock across different operations, breaking free from the constraints of their previous non-aligned terms.
With Octet’s comprehensive support, the company gained the financial flexibility and stability needed to thrive in the competitive meat industry. The partnership with Octet not only resolved their immediate challenges but also positioned the group of interconnected companies for sustainable growth and success, demonstrating how a well-structured and flexible financial partnership can turn around business fortunes and set a course for future prosperity.
Grow your business with Octet
Via our Referral Partner Program Octet empowers businesses across a range of industries, including food and beverage, manufacturing and transport, offering innovative Debtor Finance and Trade Finance working capital solutions.
Speak to our team of working capital specialists to see how we can power your business growth today.
Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
For businesses planning for growth and longevity, an understanding of business finance is not just beneficial. It’s essential. This knowledge helps safeguard financial health and equip businesses to make strategic decisions, ensuring they thrive in competitive markets.
In this article, we’ll answer the following questions: What is business finance, what are common financing options, and when is it time to seek finance?
Tim Bowring, Octet’s Head of Sales, Health, also helps us explore the business financing options for the health and pharmaceutical industry. But regardless of the industry you operate in, these insights will help you to better understand the business finance options that can help your business grow.
Understanding the best finance options for your business
Business finance encompasses all types of financial activities crucial for day-to-day operations and long-term planning. It includes managing cash flow, budgeting and funding strategic initiatives.
Tim says businesses must first grasp how cash flow works when it comes to understanding finance. “Cash is king. It pays the bills and repays debt. Having a good picture of how your cash flow works will set you up to understand the most appropriate finance options available to your business.”
Tim says when looking at types of finance, there are several key factors to consider, such as:
How often will you want to draw down on the facility?
How quickly can you repay it?
Are there ongoing fees to be paid if you haven’t used the facility or drawn all of the limit?
What security do you need to get the finance?
“One common misconception is that the lowest interest rate is the most important thing,” he adds. “But the interest rate isn’t always paramount.”
When it comes to the healthcare sector, Tim helps secure funding for businesses who work with him on a range of needs, including:
paying ongoing wages for locum doctors and dentists
importing stock and equipment
manufacturing medical supplies and pharmaceuticals
covering IT service contracts.
Business financing options
There are many financing options for managing and growing a business. Many businesses rely solely on internal sources of funding (so the funds they generate as part of operations).
When seeking external sources, most business owners will be familiar with traditional forms such as bank loans and lines of credit. However, most businesses are experiencing tightening conditions, and banks can take months to approve finance applications. Banks also often seek personal security and collateral, which is a drawback for businesses that don’t have significant assets or don’t want to risk their director’s personal assets.
Equity financing is also an option for start-ups and growth-stage companies without steady cash flow. However, this dilution of ownership and long-term commitment are significant drawbacks of this type of finance.
Trade finance and debtor finance (also called invoice finance) are two other types of business financing options. Trade finance products help facilitate international and domestic transactions, mitigating risks and facilitating smooth transactions between buyers and sellers.
“If you have to pay for stock on delivery, for example, trade finance can provide you with extended terms,” says Tim. “If you have short payment terms, there are even ways to negotiate an early settlement discount with the supplier.”
Debtor finance (also called invoice finance) helps bridge cash flow gaps by allowing businesses to borrow against their receivables ledgers.
“A business that’s growing rapidly by offering competitive credit terms to its customers is likely creating a cash shortage in the business,” Tim says. “If it is buying stock that is paid at order or shipping, it is also negatively impacting the business’s cash flow. Invoice finance can unlock up to 85% of invoice values immediately, which is essential for maintaining operations and funding growth.
“In today’s challenging environment, businesses are feeling the cash flow pinch. The key to managing cash flow gaps is often intelligently tailoring the right business finance solution for your supply chain and growth requirements.”
Healthcare companies particularly rely on a smooth-flowing supply chain to support patient wellbeing and ensure the timely availability of medical and other supplies. For many businesses operating in the industry, business finance to manage cash flow is crucial to safeguard their supply chain and network.
Ready for better business finance? What you need to know
Before applying for any variety of business finance, Tim recommends preparing by having a detailed cash flow forecast and identifying any cash flow gaps. “Then, make sure you ask plenty of questions of the financier about their processes and the specific product/s to see whether they’re a suitable fit.”
Questions include:
What security is required to obtain the facilities?
What are the line or service fees?
Does the facility or platform protect my business from risk when importing from overseas?
What is the speed of transactions? How can you support my businesses to achieve growth, whilst making informed financial decisions?
“Octet has a proven track record of supporting Australian businesses. Whatever industry you’re in, we can help you accelerate supplier payments, general cash flow and foster stronger relationships with customers and suppliers with our Debtor Finance and Trade Finance solutions.
“The Working Capital Specialists at Octet will work with you to help you better understand your cash flow, where the gaps are and what options are available for funding those gaps.”
For those in the healthcare and pharmaceutical industry, these solutions can mitigate the unique challenges faced by the industry and make the most of growth opportunities.
Discover the best business finance fit for you
For many businesses, accessing appropriate business finance is crucial to achieving sustainable growth. Octet is committed to supporting businesses through tailored financial solutions, helping them understand their cash flow and funding options and ensuring they are well-positioned to seize growth opportunities.
Whether you’re in the healthcare industry and need timely supply finance chain solutions, you’re a labour-hire company with cash tied up in unpaid invoices or a manufacturer seeking new trade opportunities, we can help. Want to know more? Get in touch with the team today.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
When it comes to complex and interconnected global trade, robust supply chain management practices are increasingly important to ensure your business is operating as efficiently as possible. As your business navigates through current geopolitical turbulence and economic uncertainties, the importance of having strong supply chain strategies becomes even more important. These global issues need to be considered not only in the context of supply chain management, but also in terms of critical external funding and cash flow solutions including supply chain finance, trade finance and debtor or invoice finance.
Impact of recent geopolitical events: Iran Drone Strike on Israel
The recent Iran drone strikes on Israel have sent shockwaves across international borders, igniting concerns over heightened tensions in the Middle East. As geopolitical tensions escalate in this already volatile region, businesses worldwide are left to grapple with the potential repercussions on their supply chains and such critical items as oil, iron ore and other natural resources. With inflation and interest rate volatility still a key concern here in Australia and other countries, robust supply chain management will continue to be a vital tool for mitigating risks and ensuring operational resilience.
By integrating risk assessment practices into your businesses supply chain management, you can proactively identify vulnerabilities and implement contingency plans. From diversifying supplier networks in other regions (or locally where possible) to leveraging advanced technologies for real-time monitoring, you can help to protect your businesses supply chain against geopolitical disruptions. On face value most of these global events appear a literal world away, but the impacts often hit a lot closer to home on real world items such as fuel and shipping container costs.
Strategic importance of China ties in supply chain management
Navigating this scenario could become even more intricate due to China’s involvement. China appears to strive for a delicate equilibrium in its Middle East relations, maintaining robust connections with various stakeholders. Notably, its close ties with Iran have come to the forefront, with reports suggesting Chinese support for Iran’s actions against Israel.
China’s pivotal role in the global economy underpins the strategic importance of its trade relationships. As a leading manufacturing hub and a key player, particularly in Australia’s supply chain networks, China’s economic movements exert significant influence on our fortunes. The interconnectedness of supply chains means that any developments affecting China can reverberate across industries and continents.
For Australian businesses engaged in international trade, maintaining a resilient and diverse supply chain often means spending time understanding China’s economic policies, trade agreements, and geopolitical positioning. The often discussed ‘Chinese housing bubble’, long-term tensions with Taiwan and many other areas have the potential to materially impact the Australian economy, with SMEs particularly vulnerable.
By forging strategic partnerships and adopting agile supply chain management practices, businesses can navigate through uncertainties and capitalise on emerging opportunities in the Chinese market.
Adapting supply chains to global uncertainties
Amidst geopolitical upheavals and geopolitical rivalries, the question arises: How does this affect global and local supply chains? The interconnected nature of modern supply chains means that disruptions in one region can trigger cascading effects across the entire network. From transportation delays to trade restrictions, businesses must contend with a myriad of challenges in sustaining the flow of goods and services.
Effective supply chain management means taking a proactive approach to risk mitigation, encompassing scenario planning, supply chain mapping, and supplier diversification strategies. By fostering transparency and collaboration across supply chain partners, businesses can enhance their agility and resilience in the face of geopolitical uncertainties.
Navigating geopolitical risks: implications for Australian businesses
For Australian businesses, the evolving geopolitical landscape poses both challenges and opportunities. As a nation heavily reliant on international trade, Australia’s economic prosperity is directly linked to global supply chains. The ramifications of geopolitical events, such as the Iran drone strike and geopolitical tensions in the Asia-Pacific region, reverberate throughout Australia’s economy.
From the mining sector to the agricultural industry, Australian businesses must assess the geopolitical risks inherent in their supply chains and devise strategies to mitigate potential disruptions. One emerging trade partner outside of China is India. In 2023 Australia and India signed the historic India-Australia Economic Cooperation and Trade Agreement (IA-ECTA):
making Australian exports to India cheaper
opening up new import opportunities
creating a slew of new job prospects for Australian businesses
The IA-ECTA is but one avenue that your business can diversify its global trading partners, ensuring that global geopolitical risks such as those currently occurring in the Middle-East and from China through Asia Pacific have a minimal impact on the supply chain and ultimately cash flow and bottom-line profitability.
Easing cash flow challenges via smart working capital solutions
In times of supply chain disruptions caused by geopolitical events, your business will often encounter cash flow challenges due to delayed payments or interrupted production cycles. This is where working capital solutions such as trade finance and debtor finance play a crucial role in mitigating financial strain.
Trade finance provides a flexible line of credit to power your businesses international and domestic trade transactions. It helps you manage the complexities of buying and selling goods and services across borders by providing flexible finance solutions tailored to your needs. Trade finance ensures parties involved in the transaction can navigate issues like payment delays, currency fluctuations and credit risks, enabling smoother and more secure trade operations.
Similarly, debtor finance, also known as invoice financing or receivables finance, offers businesses immediate access to cash by leveraging their accounts receivable as collateral. In the event of delayed payments from customers due to supply chain disruptions, debtor finance provides businesses with the liquidity needed to maintain operations and seize growth opportunities.
By integrating working capital solutions into your business’s financial strategies, you can effectively manage cash flow fluctuations arising from geopolitical events, thereby enhancing resilience and enabling cash flow for long-term growth.
Detailed and strong supply chain management practices are critical for businesses seeking to navigate the complexities of global commerce amidst geopolitical uncertainties. By embracing innovative technologies, forging strategic partnerships, and adopting agile supply chain practices, businesses can enhance their resilience and thrive in an increasingly competitive and global economy.
Octet’s tailored working capital solutions have supported many businesses with supply chain finance strategies. Contact our team of experts today for more information on how we can help power your business.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
Australian businesses have traditionally been strong importers and exporters. As a nation, we exported $432.46 billion and imported $334.11 billion worth of goods and services in 2022.
For any business that trades internationally, cash flow can be a major stumbling block to success, particularly if they want to grow to service new markets. In fact, a lack of working capital can make even the strongest business stagnate. Do any of the following sound familiar?
You understand you need extra funding to grow, but you’ve exhausted all of the traditional funding options.
You’re confident your business will continue to flourish based on past performance, but you’re not sure how to best fund new opportunities.
You’ve borrowed all you can from your bank based on your personal or business assets, and you’re not sure where to turn next.
That’s where a trade finance facility can help. But what is trade finance? This form of funding works as a revolving business line of credit that gives you the working capital you need. It helps to plug financial gaps by immediately funding a transaction so your supply chain can continue uninterrupted. Trade finance can provide funding for new opportunities or help to shore up businesses that are feeling cash flow strain on supplier payments.
In this article, we dive into what trade finance is, the advantages of this type of facility, how you can work out if it’s right for your business and more.
The lowdown on trade finance
Trade finance is a well-established business funding solution. Globally, the trade finance market was valued at more than $14 trillion in 2022. In simple terms, trade finance is a business ‘line of credit’ facility that’s ideal if you buy from other businesses, whether they’re overseas or based in Australia. Trade finance is used in every industry, including retail, manufacturing, food and beverage, pharmaceuticals, healthcare, eCommerce and more.
Let’s face it – if you’re importing or even buying locally, you don’t want all your available cash tied up in paying for goods that can take weeks to arrive. And then you can’t even begin to make your money back until you have the items in stock and start selling them.
Trade finance funding works by bridging the gap between paying for your goods and recouping your money when you sell them to customers. This kind of financing gives your business quick access to funds by introducing a trusted financial partner, such as Octet, into your supply chain.
The high-level trade finance process is simple:
Your business purchases goods from your suppliers, either in Australia or overseas.
Your financier extends you a tailored line of credit to pay those suppliers immediately.
You then repay your financier with extended credit terms.
Without finance, the longer it takes between ordering/receiving the goods and making payment, the longer your working capital is tied up in the transaction. Trade finance helps bridge that general gap. As a buyer, it lets you pay your suppliers immediately and then repay the credit facility over time. As a seller, it allows you to get paid as soon as possible to keep your own cash flow healthy.
Advantages of using a trade finance facility
Businesses use trade finance tofund their business growth and to plug cash flow gaps. But what are the real benefits of using a trade finance facility over another form of funding? Here are our top four reasons.
Control your working capital
Choosing a business line of credit like trade finance over a traditional loan means you don’t have to offer your business or personal assets as collateral.
Traditional financial institutions usually demand asset security before they lend you money. So, if you’re short on personal/director’s assets, have maxed out your borrowing limit or don’t want to use your assets as collateral to begin with, your business can stagnate.
Trade financiers often lend based on the strength of your business’ balance sheet and the risk of the supply chain transactions, not on your personal assets. They examine your overall business and transaction values to determine your credit limit. That makes it easier to grow and scale your business as your sales increase. As your transaction values and profitability grow, so can your funding limit.
This benefit is significant if your business, industry or market is experiencing supply chain issues. Disruptions to your supply chain can widen your funding gap. With Octet’s Trade Finance facility, you can close this gap and provide your business with a cash flow advantage by extending your payables by up to 120 days.
With our intelligent solution, we pay 100% of supplier invoice values, including any upfront deposit requirement. When combined with interest-free terms of up to 60 days, you’ve got a flexible and powerful financing tool for your business.
Flexibility with global transactions
International trade is complex at the best of times, so anything that makes the process smoother has to be good for your business. Using a trade finance platform makes it easy to pay global suppliers using other currencies.
Currency fluctuations are an inherent risk in any international transaction. If the rate between the Australian dollar and your supplier’s currency changes dramatically overnight, you could suddenly owe a lot more than you’d budgeted. Trade finance can safeguard against these currency fluctuations by setting the exchange rate for the transaction upfront.
Our Supply Chain Platform gives you single-click payment across 72 countries in your choice of up to 15 currencies, which greatly reduces costly bank FX conversion fees and margins. Or you can bring your own third-party forward exchange contract to the transaction via our supply chain platform too. In just one click, you can authorise the payment, knowing that the FX is handled quickly and easily in a single, hassle-free step.
Early repayment discounts
Using a trade finance facility makes your cash available shortly after you receive your supplier’s invoice. This enables you to take advantage of anyearly settlement discounts your suppliers may offer (or you’re able to negotiate). This can ultimately save you money on your goods and services and allow you to repay your financier over a longer timeframe.
With the Octet Trade Finance solution, you can pay both international and domestic suppliers. And for those domestic suppliers, this can be related to invoices for goods or services. This flexibility allows you to use the funding and seek early payment discounts for a broader scope of supplier types and transactions than other funding options may allow.
Reduce global trading risk
Trading internationally always comes with anelement of risk, and there are often few, if any, safeguards. If you’re an importer, there’s no guarantee that your goods will actually arrive. As an exporter, you risk not being paid on time, or at all, once you’ve sent the shipment.
A smart solution like our Trade Finance facility makes it easier and safer to trade, regardless of which side of the transaction you’re on. That’s because both the buyer and supplier are registered and linked to one another on theOctet Supply Chain Platform. Both parties to a transaction must sign up for the facility and be verified before it can proceed. We verify both parties to make sure they’re legitimate, which helps to significantly reduce these global trading risks.
The platform’s embedded claim and authorisation process also enables seamless communication between both parties. This ensures transparency and nullifies any payment dispute risk. It’s a win-win.
Is trade finance right for you?
As with any financial decision, it’s essential to do your homework and make sure both the financier and product are suitable for your business before applying for a trade finance facility. It’s important to ensure your finance partner has the reputation and experience to handle this type of finance securely.
The top four factors to consider when you’re researching trade finance solutions are:
Eligibility
Not all businesses are eligible for trade finance funding. A financier will base eligibility on factors such as size, industry and the business’ specific requirements. For example, our Trade Finance solution is open to profitable Australian businesses with an annual turnover of at least $3 million.
Costs
As with any financing solution, there’s a cost to using trade finance. That means you need to understand your profit margins and expenses so you can build the finance fees into your supply chain.
The cost of a trade finance product varies depending on the length of time you use it and the type of facility. But once factored into your budget, the facility fees can become a normal business cost.
Product suitability
Most financiers offer a range of products, but not all will suit your business. Do your research and seek advice on which product is best for you in your circumstances.
In addition to ourTrade Finance product, we also offerDebtor Finance,Supply Chain Accelerate andOctetPay. You might find that a combination of these products may be the best fit for your business.In fact, by combining Debtor Finance and Trade Finance facilities on our Supply Chain Platform, we can give your business an integrated funding package. Incorporating both facilities gives you a back-to-back financing solution featuring:
a business line of credit to pay suppliers, with extended repayment terms (Trade Finance)
an instantly drawable funding source leveraged against your receivables (Debtor Finance).
This can simplify those periods of rapid growth, especially when you win new projects or contracts with initial expenditure requirements. With these solutions, you can leverage the increased sales revenue and mobilise that cash flow to close the funding gap.
Clear obligations
Most financial products can appear complicated when you start out, but they should have clear terms that they require both parties to follow.
Make sure you understand any obligations that come with the funding facility. If you’re unsure of anything, get your financier to explain exactly what you need to do to fulfil your obligations for their product.
Octet’s Trade Finance: close the cash flow gap
Octet’s Trade Finance facility gives you the power to bridge the cash flow gap. To be eligible, your business will generally need to have:
a turnover of at least $3 million
been trading profitably for at least two of the past three financial reporting periods
a positive balance sheet net worth
up-to-date ATO payments
current management and financial accounts.
The amount of funding you can access depends on your business. We’ll look at your most recent financials and management accounts to calculate a limit based on factors including:
your equity
your cash position
how profitable your business is.
Advantages of our Trade Finance facility
Close your working capital gap. We offer up to 120-day repayment terms and 60 days interest free, so you can pay your suppliers immediately and then repay us over time.
Unsecured. Our non-bank trade finance can be completely unsecured, meaning that we don’t require your real estate or personal assets as security to offer you finance. Alternatively, we also offer secured Trade Finance options.
Quick turnaround. You’ll get an answer to your finance application within days, not months. That’s much faster than traditional options.
Flexibility. You can use our finance either as your main funding source or to supplement traditional financing. So, if you want to diversify or your bank isn’t servicing your needs sufficiently, you can use trade finance as top-up funding.
Easy international trading. Our Trade Finance facility makes it easy to pay suppliers in more than 72 countries in a choice of 15 global currencies.
Secure platform and trading. We verify all members in our system to give you confidence that your trading partners are legitimate. Our information systems use best-in-class firewalls, encryption, hardware and procedures to keep your datasecure.
How does our Trade Finance facility work?
Our Trade Finance facility has a simple workflow.
Submit your application. Applyonline, and if you’re successful, we’ll approve you and give your business a facility limit.
Invite a trading partner. Add your domestic and international suppliers to the Octet platform. You don’t have to add all your suppliers to the system — just the ones you want to use the facility to pay. We’ll then ask them to enter their details so we can verify them.
Place your order. Add your order to the Platform. Our system will notify your supplier so they can accept the order. You can upload any documents needed for the transaction — such as the purchase order, invoice and bill of lading — through the Platform.
Authorise payment. Once the transaction is complete, you authorise the order and choose which funding methods you want to use to pay. This might be our Trade Finance facility, a credit card or a bank facility — or you could split the payment across multiple methods.
It’s that simple and safe. Our closed-loop Platform ensures the upload of all necessary documents, such as the bill of lading, before the order can be approved. That means you can be assured the transaction is valid before you pay.
How Octet’s Trade Finance accelerates business cash flow
Our Trade Finance facilityhelps you smooth out the cash flow fluctuations in your business.
For example, let’s say you sell sunscreen. As a seasonal business, you’ll need to order a lot of stock as the warmer months approach. Having a Trade Finance facility in place helps reduce the cash flow pressure that will build at that time.
Of course, regardless of the climate, other businesses may be flourishing and need extra cash to take advantage of opportunities for growth. In these cases, Trade Finance funding can provide a cash flow injection to help deal with demand.
This was the case for online wine retailer Vinomofo. The business had organically funded its growth without any debt since it began in 2011. But in 2020, when consumers moved to buying online during the pandemic, Vinomofo saw its opportunity to grow. Cash flow was good, but it needed a finance partner to take advantage of the deals on offer. Octet’s flexible finance allowed it to seize new opportunities faster than its competitors, which led to impressive and sustainable business growth.
Go Vita has also harnessed Octet’s Trade Finance. The health and wellness retailer was opening new stores nationwide and taking on new suppliers but wanted to preserve cash flow. The Octet Trade Finance facility allows them to do just that, and as Go Vita continues to grow, so too does the facility.
Discover if trade finance is right for you
No matter whether you need help to ride out the storm or fund exciting growth opportunities, trade finance will help your business power through.
Find out more about our Trade Finance facility and if it’s right for your business, or talk to usto find the best solution for your business needs.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.