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£360,000 International Finance: Invoice Finance and Trade Facility package

Published on 8th December 2019 - Last update on 11th March 2020

Trade has become global. Finding the best price for key supplies can mean doing business with a company in China, Korea or India. This means that UK businesses will often find themselves depending on suppliers on the other side of the world - and that can mean problems with cash tied up on goods in shipment.

The traditional approach can involve a pro-forma invoice, negotiating shipping costs, opening a letter of credit at your bank, customs and reams of paperwork - and yet still trigger a cash flow crisis if a large order has to be paid for before the manufacturer will ship it. 

At Rangewell, we believe in the importance of international business for UK companies. But for many, doing business globally can seem like a headache of complications and bureaucracy. We recently looked at a package of solutions which would provide a total of £360,000 funding to help a business find a better way to fund its importing - and its sales.

The Challenge of Importing

We were approached by a company that provides a unique niche solution - packaged disposable cutlery and meal kits. They serve clients such as fast food chains and airlines, and provide products that range from basic plastic knives and forks to complete  dining utensil sets including special compartmented plates and bowls ready to be filled with food by catering companies serving airlines and other transport clients.

Many of the products are supplied with special colours and logos, and - although they can provide standard items - many are specially designed for the end client’s needs.

“You can’t just provide a basic and flimsy knife and fork. Our clients want cost-effective solutions - but they don’t want to let their customers think they are getting anything substandard. They will usually want their logo on the items they provide too.”

Our client has high manufacturing standards, and has built up relationships with a number of manufacturers in China. But the long lead times involved meant problems with cashflow.

“Even with a repeat order, we have to wait weeks for a production run to be scheduled and a consignment shipped. We have to pay upfront to get an order produced and that means we have cash tied up for 6 to 8 weeks before what we need reaches the UK. Then we have another wait before our clients pay us.”

Issues such as shipping times and different approaches to credit across different markets can create long delays between placing an order and delivery being made. This can create a major financial hole that many importing businesses struggle to fill.

We looked at the solutions available - and realised that the client actually needed two types of funding. 

Trade Facility

The first solution was an International Trade Facility - a type of funding provided by a bank, which can call on an international network, giving it a local presence with suppliers around the world. 

We found an international bank that could arrange locally-available funding for an order with a supplier, and would allow that order to be manufactured and shipped with no payment required form our client.

This type of Trade Finance is ideal when dealing with orders from around the world, and is usually repaid when goods reach the business ordering the items in the UK.

“With Trade Finance, we didn’t have to fund an order and wait months until the goods arrived. The bank took care of all the details for us.”

In this case, our client needed an additional line of funding - which would provide credit until their customers paid for the goods. 

Invoice Discounting

Our second solution was an Invoice Discounting agreement, which would allow our client to receive payment as soon as they had shipped an order to their customers and issued an invoice.

This type of funding provides prompt payment. Even when a customer took weeks or months to pay our client, the funding provider would ensure that they could receive payment as soon as a consignment was shipped on the strength of the invoice issued.

This would allow our client to pay off their Trade Finance, and provide additional cash to reflect the profit they would make on the order. 

“With Invoice Finance, we get a cash advance as soon as we issue an invoice.”

We found an Invoice Finance specialist which could offer the most appropriate arrangement.

There are many providers offering Invoice Finance, and several banks and other bodies offer Trade Finance. But being able to arrange both types of finance, and to dovetail them together into a complete funding package, demands specialist help. 

At Rangewell, we can provide the specialist help you need. Whether you’re looking to ease cashflow with an appropriate Invoice Finance agreement, or need to make your importing costs more streamlined, we can help tailor a finance package to your business’ needs.

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Richard Mitchell

Richard Mitchell

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