This client is a growing Food Wholesaling business that supplies to the big retailers.
They were looking to increase the number of product lines into the supermarkets, due to the excellent sales uptake of their healthy kids’ products, as well as hire more employees. The bank has been providing an overdraft facility for several years, but the business had now reached its cap against the equity in the property which the bank had as security, as a result there was a working capital squeeze on the business, due to the long cycle of ordering the product locally and from overseas; manufacturing time; shipping and then the long trade terms with the supermarkets.
The broker approached OptiPay for a solution and a two-sided trade finance facility was put in place, in order to free up working capital and allow the client to keep growing.
How Does it Work?
The client, off the back of purchase orders received, implemented OptiPay’s Trade Finance facility by utilising OptiPay’s money to pay local manufacturers “cash on delivery”, which allowed the client to negotiate up to 6% early settlement discounts with its suppliers. Then on the products that are ordered from overseas, the client utilises OptiPay’s Import Financing facility to pay the overseas factories.
When the finished goods (local and imported) are delivered to the supermarket/s, the Trade and Import funding provided by OptiPay is then repaid back to OptiPay when the supermarkets pay the client’s invoices (as per their normal 45 to 60 day trading terms).
This solution provides an immediate improvement in GP margins (difference between the 6% settlement discount and the small fee charged by OptiPay). As importantly, by providing the client up to 90 days to repay the Import Finance facility this eliminates the need for the client to tie-up their valuable working capital. The knock-on effect of bringing forward his cash flow is that the client is able to order stock more frequently thereby increasing the number of sales cycles than previously.
This funding from OptiPay allows flexible fundings and redraws on an ongoing basis. The facility has limited recourse to the client as it is protected by OptiPay’s market leading OptiPay Secure insurance protection policy and no property security is required.
What the broker said: “We initially thought the bank was the best option for our client, but we’ve learnt something new and genuinely feel we have added real value to our client’s business thanks to the funding solutions provided by OptiPay”
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