Freight surcharges, currency fluctuation and upfront supplier payment requirements are pushing import costs higher and higher for Australian and New Zealand SMEs. For some businesses, they even need to pay overseas suppliers in full long before stock is sold and customers pay their invoices.

So, how can you fund rising import costs without draining your business’s cash flow?

The answer: A joint Trade Finance and Invoice Finance facility.

Why do Trade Finance and Invoice Finance work?

A ScotPac Trade Finance facility works to close the gap in time between needing to fund payment to a supplier. While Invoice Finance facility allows advance access to working capital locked up in unpaid invoices. Together, these solutions work to ensure cash flow is available for new stock orders, wages, rent and growth.

Why Are Australian Importers Facing Higher Landed Costs Right Now?

Landed costs for imported goods have climbed due to a combination of compounding factors rather than any single cause.

Importers are typically absorbing:

  • Higher international freight costs
  • Higher container rates
  • Currency volatility between the AUD/NZD and USD
  • Increasing tariffs, customs duties and compliance costs on certain goods categories
  • Supplier demands for deposits or full payment in advance, rather than open account terms

Each of these adds more pressure on available working capital at the exact moment a business needs cash on hand to keep trading and operating as normal.

Additionally, more and more suppliers are wanting full payment before goods leave the port. After all, they are trying to manage their own supply-side risk and volatility.

Add on top of that the costs of shipping and currency conversion and the fact that the ordered goods are yet to be sold and generate cash inflow.

The timing mismatch is the real driver behind rising import costs eating into cash flow. And it is why more and more SMEs are turning to ScotPac’s Trade Finance solutions.

What Happens to Working Capital When Suppliers Demand Payment Before Goods Arrive?

To reiterate, the core problem is a cash flow gap, not a profitability gap.

A business can be highly profitable on paper and still struggle with cash flow. The reason being that the money goes out to the overseas supplier weeks or months before money comes in from local customers. Without a working capital solution businesses may need to:

  • Delay reordering stock
  • Miss meeting seasonal rises in demand
  • Draw down overdrafts to ensure ongoing operation
  • Drain personal savings to cover supplier payments
  • Turn down larger orders because the deposit required is simply too big
  • Miss out on early or bulk order discounts

How Does a ScotPac Trade Finance Facility Help You Pay Overseas Suppliers Without Draining Cash Reserves?

A Trade Finance facility provides funding to your supplier directly once the goods are confirmed for shipment. Put another way, it provides your business with the breathing room it needs to continue operation whilst it receives, sells and converts that stock into cash.

  • ScotPac pays the supplier on your behalf, often with 30, 60 or 90 days’ credit
  • You retain working capital for wages, rent and other operating costs
  • Funding decisions are typically approved in as little as 48 hours
  • There is no need for property as security

Why is a Trade Finance Facility Linked With an Invoice Finance Facility?

With ScotPac, a Trade Finance facility is not set up in isolation; it operates alongside an Invoice Finance facility. The reason for this is important.

  • Trade Finance covers the outgoing side of the cycle and allows you to pay suppliers on time and in full.
  • Invoice Finance covers the incoming side ensuring you receive money owed to you in advance.

Used strategically together, Trade and Invoice Finance can fund the entire trade cycle, from purchase order through to customer payment.

When you work with ScotPac, you benefit from:

  • A single working capital partner managing both ends of the supply chain
  • Up to 85% of invoice value released early once goods are sold, rather than having to wait 30- 90 days
  • A scalable facility that automatically grows as sales volume grows

Trade Finance vs Overdraft vs Unsecured Business Loan: Which Option Best Covers Rising Import Costs?

Why use Trade Finance over alternative and more traditional forms of finance such as an overdraft facility or a bank loan- whether secured or unsecured?

With a custom Trade Finance and Invoice Finance arrangement, you:

  • Do not need to put up property as security or use a personal guarantee
  • Do not need to reapply to raise a fixed limit as you grow
  • Can set up funding approval in as little as 48 hours

How do you apply for Trade Finance with ScotPac?

There are two ways to apply for a Trade Finance facility with us.

  1. Fill out a quick enquiry form on our website; or
  2. Call us today on 1300 850 322.

Our team can help determine the right facility size and structure for your business and help fuel your long term success.

Here at ScotPac, we support over 9,300, fund over $26 billion in invoices annually and have more than 35 years of experience. So, if you need to fund rising import costs but don’t want to drain your business’s cash flow, make sure to reach out to the ScotPac team today.

FAQs About Funding Import Costs without Draining Cash Flow

Can a small business with only a few overseas suppliers qualify for Trade Finance?

Trade Finance is not only for large importers. It, along with Invoice Finance, is available to SMEs, basic eligibility criteria notwithstanding. The facility size is generally based on trading history, invoice volume and the strength of your customer base rather than the size of the business itself or even a traditional credit score. 

Does Trade Finance require me to put up my house or other property as security?

No. One of the distinct advantages of ScotPac’s Trade Finance and Invoice Finance facilities is that they are typically secured against business assets such as unpaid invoices and trade stock, rather than property or other assets. 

Can I use Trade Finance for importing raw materials, not just finished goods ready for resale?

Yes. It’s not just the importing of finished goods that can be funded. Trade Finance can support the import of raw materials, components and/or finished goods. Our lending specialists work directly with you to ensure the right working capital lending structure dependent on what stage of the supply chain the funding needs to cover and the particulars of your business. 

How long does it take to get approved and access funds to pay an overseas supplier?

Approval and funding can be available in as little as 24 to 48 hours once a facility is in place. Unlike most traditional bank loan processes, at ScotPac we’ve cut the red tape and elongated approval processes. 

Can Trade Finance run alongside an existing bank overdraft or other lending facility?

In many cases, yes, it can. Both Trade Finance and Invoice Finance can sit alongside existing banking arrangements. The reason is because they’re typically secured against trade assets and receivables rather than property assets.