Food and beverage suppliers often want paying before the container is loaded, weeks or months before the stock reaches your warehouse and sells. Trade Finance can pay those suppliers for you, so your own cash isn’t tied up while the goods are on the water.
ScotPac Trade Finance can fund up to 100% of the cost of goods, for up to 150 days. Repayment is agreed around your trading cycle, but it is still due on the agreed date if a shipment is late or stock sells slowly.
It typically works alongside Invoice Finance, which releases cash from the invoices you issue to grocers, distributors and food service customers once the stock sells.
Why is managing cash flow harder for food and beverage importers?
Food and drink don’t behave like other imported goods. A pallet of homewares can sit in a warehouse for months. A pallet of chilled product can’t.
That makes delays expensive. A container that sits in port for 2 extra weeks isn’t just late. The stock may be too close to its use-by date for your customers to accept, and a missed delivery window can cost you the sale as well as the goods. Shelf-stable lines give you more room, but they still have a date on them.
The money usually has to go out early too. Many suppliers of packaged food, beverages and other fast-moving consumer goods want a deposit or full payment before shipment, so you’re paying well before the stock arrives, let alone sells.
Then there are the seasonal spikes. Extra stock for a promotion, the Christmas rush or a new product launch all has to be ordered and paid for months before it sells.
Trade Finance can pay your supplier when payment falls due, so the order isn’t held up waiting on your cash and your own money isn’t tied up while the stock is on the water. It won’t take away the other risks of importing perishable goods, so you’ll still need to plan for delays and stock that’s slow to sell.
How does Trade Finance for FMCG cover your stock order?
A Trade Finance facility is structured around a specific purchase order. It is not a simple injection of working capital.
- You place and confirm your order with a supplier, overseas or in Australia.
- Depending on your approved facility and transaction, ScotPac can fund up to 100% of the cost of goods.
- Supplier payment follows the conditions and timing agreed for the transaction.
- When the stock arrives, you can sell it to your customers under your normal trading arrangements.
Once you invoice your customers, the Invoice Finance facility that typically sits alongside Trade Finance can bring that money forward. If an Invoice Finance facility isn’t the right fit for your business, there may be other options available, and a lending specialist can talk them through.
Can the facility grow with your order volumes?
It can, but not automatically. Food and beverage order volumes swing with seasons, promotions and bulk buys, so tell your lending specialist when you expect bigger orders. Limits can be reviewed to support repeat or larger orders, subject to approval.
What this looks like in practice
A specialty beverage importer brings in chilled and shelf-stable drinks from Italy and supplies around 60 independent grocers and cafés on 45-day terms. Each container costs about $180,000, and the supplier wants paying before it’s loaded.
From there it’s roughly 6 weeks at sea and another week or 2 to clear port, and the chilled lines only have about 4 months of shelf life to start with. Most grocers won’t take stock with less than 2 months left, so a late container quickly becomes a hard one to sell.
Add the 45 days the grocers take to pay, and each container ties up its cost for around 4 months. With about $200,000 in reserves, the business could only afford one container on the water at a time, which meant turning down bigger orders when summer came around.
Funding the supplier payments through Trade Finance means it can keep a second container on the water ahead of the summer peak, without dipping into the cash it needs for rent and wages.
How does Trade Finance work alongside Invoice Finance?
Trade Finance typically works alongside Invoice Finance, because together they cover the whole trade cycle.
- Trade Finance pays your supplier so the order can be made and shipped.
- Invoice Finance provides an advance against eligible unpaid customer invoices, subject to approval and facility terms.
So the money you pay out to suppliers and the money you wait on from customers are both covered.
How do you set up a Trade Finance facility for FMCG?
It starts with a conversation. A ScotPac lending specialist will want to understand how you buy and sell: who your suppliers are and what payment terms they ask for, how long stock takes to arrive, and who you sell to and how quickly they pay.
From there, they’ll work out whether Trade Finance on its own fits, or whether it works better alongside Invoice Finance. Every facility is built around your supply chain and customer base, so no 2 look quite the same.
Once your facility is approved, you submit each order as it comes up, and ScotPac pays your supplier when the agreed payment falls due. If you’re buying ahead of a seasonal peak or a product launch, start the conversation well before the order is due, so the facility is in place when you need it.
What doesn’t Trade Finance for food importers cover?
Trade Finance primarily funds payment to your supplier for the stock itself. Freight, insurance and customs costs are usually managed separately, so allow for them when you plan your cash flow.
It also funds specific orders rather than giving you a general pool of cash. You can talk through your planned buying when the facility is set up, but each supplier payment needs an approved order behind it.
And the Invoice Finance side only works with invoices to business customers, so sales made directly to consumers can’t be funded that way.
Planning your next stock order? Get in touch with a lending specialist.
