Christmas is coming (and Boxing Day and Hanukkah and Chinese New Year).
Plus, the integration of Black Friday and Cyber Monday into the Australian retail cycle means that retailers need to:
- order stock in earlier; and
- hold it longer.
So in October and November, retailers all around Australia are ordering in stock – stock that they will likely have to pay for long before they sell it.
And after the (increasingly reduced) January sales, then comes the annual cash flow black hole – where all the usual expenses continue but the cash flow doesn’t.
If they’ve got their sums right, and everything goes to plan (despite cost of living increases and reduced consumer demand) then eventually retailers can hope to make a profit.
BUT even for those that get their forecasts somewhere close, the period leading up to the retail festive season (and the quiet month after it) are still full of cash flow shortages, stress and sleepless nights.
There is a “secret weapon” you can call on
There is a family of business financing tools available to SMEs today that can help you to:
a) stock up for the festive season, despite reduced consumer spending; plus
b) survive January’s “business valley of death”.
What if you had more time to pay your supplier invoices? Say 60 days more time?
With Trade Finance, you can get a 60-day (or 90-day) loan to pay your suppliers on their invoice due date, at an agreed interest rate.
This loan then gives you more time to retail your stock and get your customer payments into your bank account.
So if you get 30-day terms from your supplier and 90 day terms from a flexible FinTech Trade Finance provider, this could give you 120 days (nearly 4 months!) to turn your purchased stock into profit.
What will it cost you?
At time of writing, Trade Finance interest rates are sitting at 18%, depending on turnover.
In monthly terms – and I look at business as a month-to-month cash flow process – that’s around 1.5% a month.
It isn’t a huge overhead – and the interest only applies for the period that you USE the funding. In terms of stress avoided and bills paid, that’s a pretty good offer.
Trade Finance isn’t all that new
Trade Finance has been used for decades by importers and exporters. It developed as a tool to deal with the long time gaps for shipping products internationally.
Trade Finance is now a whole lot more ACCESSIBLE
These days, Trade Finance can be used for local purchasing, not just international transactions.
PLUS, today’s technology-enabled FinTech Trade Finance products take most of the administration overheads out of the paperwork process. They integrate with today’s smart accounting tools – like Xero and MYOB – without lots of extra manual processing.
FinTech providers are entrepreneurially minded – so the main security they ask for is based on your business balance sheet, not your personal asset holdings.
How do you know whether Trade Finance would help your business?
Take a moment to look up the value of the supplier invoices that you raised in the past 60 days. Write down the total amount.
Ask yourself if 80% of that amount – as cash in your bank account today – would let you run your business better today?
If the answer is “yes” then book a strategy review with Cash Flow Strategist Martin Cattach today.
Which Trade Finance is right for your business?
There is a growing range of smart, flexible, automated Trade Finance tools in the market – with some super-powerful features.
The “right” one for you to use is one that meets your business needs with a minimum of administrative overheads. That’s why you need to put a Working Capital Strategy in place BEFORE you go shopping for individual business financing tools.
If you’re about to order big for Christmas, and already stressing about the post-Christmas black hole it’s going to create in your cash flow, then book a strategy review with Working Capital Strategist Martin Cattach today.
