All business owners would probably prefer to conduct all transactions on a cash-only basis, but that just isn’t realistic because it would tend to limit the volume of sales in your company. By allowing for trade financing with your customers, you make it possible for them to make purchases, or to make larger purchases, than they would have been able to make if all transactions were strictly cash. On the other hand, allowing trade credit to customers can open up a real can of worms, in terms of delayed or late customer payments. Here is how trade financing works, and how you can take advantage of it to help your business grow.
The nuts and bolts of trade financing
By allowing customers to purchase goods on credit, you can enjoy some or all of the following benefits:
- Higher sales volume – customers will almost always buy goods in greater volume when they don’t have to pay cash for them.
- Customer loyalty – the fact that you’re allowing customers to buy on credit will usually instill a certain amount of loyalty in them, so you can count on repeat business
- Competitive advantage – if your rivals cannot offer trade financing, you might get a leg up on them because you do make this option available to customers
- Early payment incentives – you can offer incentives to your customers to pay early, so you’re not obliged to wait the full 30 days before receiving payments. For instance, by offering some kind of discount for early payment, you may be able to get most payments well ahead of the 30-day terms allowed for in such purchases.
Is your business hampered by trade financing late payments?
Many business owners who offer trade financing find themselves with cash flow issues, simply because payments are delayed while expenses remain immediate. If your business is suffering for this reason, we may be able to provide financial assistance. Contact us at My Commercial Capital to find out if you’re eligible for a business loan that can help you stay afloat until revenues come in.