Seasonal stock usually has to be paid for months before it sells. Trade Finance can pay your supplier for that stock, so your own cash isn’t tied up while the goods are made, shipped and sold. If you also sell to other businesses on trade terms, it typically works alongside an Invoice Finance facility and can fund up to 100% of the cost of goods. If you sell only to consumers, there are other ways to structure it, and a lending specialist can talk you through what fits.
Why does seasonal stock tie up cash for months?
Retail runs on a calendar. The stock for a season has to be bought well before the season starts, which means the money goes out long before any comes back.
A retailer stocking up for summer might place its order in autumn, or even winter.
Suppliers have their own production and shipping schedules, and they often want paying before the goods leave the factory or warehouse. Some want a sizeable deposit before production even starts.
Meanwhile, you don’t earn anything from that stock until it has been delivered, put on the shelves and sold. That can take 4 or 5 months.
None of this means the business is doing anything wrong. It can happen when trade is booming.
It is just how retail buying works: the order goes in ahead of demand, and the supplier is paid on their terms, not yours.
Trade Finance can help bridge this gap by funding eligible supplier orders, leaving more working capital available for rent, wages and other business expenses.
How does Trade Finance for retail cover this cash flow gap?
ScotPac Trade Finance can fund up to 100% of the cost of goods and pay the supplier directly under the agreed arrangement. Once the goods are sold and invoiced to your business customers, Invoice Finance can then release cash from those invoices.
Meeting supplier payment requirements can help an order proceed, although production and delivery remain dependent on the supplier and logistics.
What does the funding cycle look like, from order to repayment?
A typical funding cycle may involve the following steps, depending on the approved arrangement:
- Discuss your planned stock purchases and funding needs with ScotPac.
- Provide the business and order details for assessment, and get the facility approved.
- Confirm the order quantity, price, currency, delivery schedule and payment terms with your supplier.
- ScotPac pays the supplier when the agreed payment conditions are met.
- The supplier produces and ships the goods.
- You receive the stock and sell it through the season.
- You repay the funding on the agreed terms.
What this looks like in practice
A homewares brand sells through its own 2 stores and supplies around 40 independent gift shops on 30-day terms. Its Christmas range comes from suppliers in China who want paying before the goods leave the factory, so the cash goes out in August and September for stock that won’t sell until November. Funding the approved order through Trade Finance means the suppliers are paid directly, and the brand’s own cash stays free for the September trade show where the gift shops place their orders. Once those orders are delivered and invoiced, Invoice Finance brings forward the money the gift shops owe.
What support does ScotPac offer for retail stock finance?
ScotPac is Australia and New Zealand’s largest specialist provider of working capital solutions, supporting more than 9,300 businesses and with over 35 years of experience. You get the knowledge of a major finance provider with the speed and flexibility of a specialist lender.
Our lending specialists work with you to structure funding around the stock you need, and we have trade specialists in Australia, New Zealand and China who can help you negotiate terms with your suppliers.
Planning your next seasonal order? Get in touch with a lending specialist.
