Finance For Wholesalers Buying Overseas

As a wholesaler, it may come as little surprise to learn that some of the highest profit margins exist when you can arrange direct relationships with producers or manufacturers in other countries. By cutting out any middleman arrangement, you can buy direct at a better price and then resell the products in the UK.

Whilst this idea is good in theory, it limits how you may approach a traditional finance agreement. For many lenders, including high street banks, the risks, restrictions and complications associated with some overseas purchases may lead to them refusing to lend or only offering sub-par terms. 

As a team of experts in the lender's market, Rangewell helps support wholesalers and distributors in raising finance for buying overseas stock. We work with every type of lender and can identify those who are interested in your business, then help you build an application and negotiate a deal on your behalf. Contact us today to get started, or read on to find out more about how finance may work for you. 

Issues around overseas assets/stock

When you're aiming to raise finance to use to fund an overseas purchase, the lender must consider all of the associated risks:

• Supply chain disruptions: if you're trying to set up an ongoing relationship with a manufacturer, you need to ensure their production process is flawless so your own business can accurately predict sales. However, when setting up an overseas relationship you're likely dealing with language barriers, timezone challenges and different working cultures. It's easy to see how, in scenarios like that, you may encounter supply chain problems during the manufacture of your goods.  
• Shipping issues: once a product is ready overseas, you need to get it to the UK. Shipping carries various challenges, from unpredictable costs to time delays that can eat into your profits or disrupt your business entirely. It's also worth noting that in a climate-conscious world where UK businesses need to demonstrate a commitment to net zero, some shipping options are associated with heavy greenhouse gas emissions. 
• Currency fluctuation: if you're buying products in the local currency, conversion rates may change during negotiations and lead to unbalanced pricing. If you're putting down a deposit or purchasing a percentage of the product up-front, you may see currency rates change and subsequently lose out on cash. 
• Customs and legality: you'll need to deal with both UK law and the laws in your seller's country. The UK has strict customs guidelines that you can't afford to get wrong, whilst other countries may have unique laws around foreign investment or shipping to the UK. It pays to consult a legal expert to ensure you're on the right path. 
• Taxes: as with customs law, specific tax regulations are applied to imports. Check with an accountant to make sure you're paying the correct amounts. 

All of these issues help demonstrate why a lender may hesitate to fund a wholesaler that wishes to buy products overseas. However, they also show a pathway towards strengthening your chances at successful finance. Take steps to mitigate the risks by following this process:

1. Ensure you've got a clear forward agreement in place with your proposed manufacturer/producer - this limits the impact of currency fluctuations. 
2. Establish a shipping process that includes back-up methods for when issues occur. Build relationships not just with your client, but also with shipping companies near them so you don't just default to their provided shipping partner. 
3. Buy from suppliers or producers that already have assets or stock available, not just those offering to produce certain quantities. Having tangible stockholding you can physically inspect gives everyone more confidence in the purchase.

Understanding your options

When making a lending decision, banks and independents alike look at your business and its ability to repay a loan. If your business has exhibited strong performance here in the UK, a lender may view you as less of a risk and issue finance against your current UK business activities. Depending on the terms of said loan, you could simply use this to purchase stock overseas. However, if something were to go wrong with that deal and your cashflow was heavily compromised, you'd still need to repay the lender. 

Trade finance

When you're working with a new supplier overseas, there's no guarantee that goods will reach you on time to maximise your selling opportunities. Trade finance is when a lender will pay your supplier for goods until you sell them, essentially buying the risk from you and allowing you to sell without the cashflow pressure.

Rangewell can help you negotiate a trade finance arrangement with beneficial terms and rates, but only if you get in touch with us before you agree to any new supplier relationships. Consult us first and see how we can improve your chances of securing finance. 

Asset financing

Instead of using a general business loan to fund overseas assets, you could also look for specific lenders who offer asset financing. Asset financing is when a lender loans against the value of the asset. However, in the case of overseas financing, lenders may be unwilling to offer asset loans because there's more risk of issues during shipping or through currency fluctuations that impact the asset's value once it reaches the UK. 

Asset finance is only generally available on certain types of product and will be discretionary to each lender. Contact Rangewell today and we'll discuss your plans for distributing an overseas asset and see if this type of finance will suit you. 

Cashflow loans

When purchasing stock from overseas, cashflow can become a challenge as you'll be waiting for the products to arrive before you can sell them and recoup the investment. Cashflow loans can be a great way to keep your business moving forward and to mitigate any potential delays. 

Some lenders may even be willing to provide purchase order finance to overseas suppliers, which will help you pay for products without having to overcommit your own capital. However, this will again be limited by the issues and concerns we've discussed regarding overseas assets. 

Get a loan for overseas trading with Rangewell

As a wholesaler or distributor, you need finance to help mitigate cashflow issues whilst ordering overseas stock. Our team can help you understand the lender's market, identify the right type of loan for your needs and even secure the deal for you. Take the stress out of finance by working with Rangewell.