Commodity purchase financing is increasingly becoming an alternative to traditional bank credit. However, finetrading is still unknown to many companies as a relatively new instrument in the financing market – although there are many key advantages over traditional loans and loans for financing goods and supplies.
What is goods purchase financing?
Finetrading – in German: Wareneinkaufsfinanzierung, is a financing instrument with which companies receive a payment delay for the purchase of goods. Finetraders, mostly non-bank companies, act as intermediaries between suppliers and companies and pay for the goods they need. This extends the payment period and companies bridge seasonal bottlenecks and financing peaks.
Commodity Financing provides companies with the necessary funds to finance the purchase of goods without having to borrow a bank loan. The companies are thus distributing the expenditures over the following months and gaining room for maneuver.
Commodity Financing: The key benefits for you at a glance
Although more and more companies are using finetrading as part of their financing portfolio, others continue to rely on overdraft facilities and loans. Finetrading offers decisive advantages over classic instruments such as the purchase of goods. The 7 biggest pluses that come in handy for financing goods and supplies via goods purchase financing for you:
1. Improvement in credit quality compared to bank credit
The inclusion of a bank loan for the financing of goods influences the credit rating and always has an impact on further planned investments of the company, as the equity ratio deteriorates. The additional funds even increase the company’s creditworthiness when it comes to purchasing in comparison to bank financing.
2. Use of discount and discounts
By financing the purchase of goods via finetrading companies can buy larger quantities from the supplier. It also makes sense to take advantage of seasonal conditions in this way. The company gains independence.
3. Protection of existing credit lines
Often companies finance the purchase of goods or commodities via the overdraft facility or a working capital loan . Finetrading lends itself here as a supplement, so that the bank overdraft for other running costs in the enterprise remains usable.
4. Extension of the term of payment
Finetrading allows the payment for required goods to be distributed over the following months with the corresponding sales returns (up to 120 days on the purchase of the goods).
5. Financing independent of collateral security
In the case of the purchase of goods, the collateralisation takes place in the vast majority of cases via a trade credit insurer. Real securities , on the other hand, remain untouched.
Background: What counts for real collateral?
- machines and devices
- shop fittings
6. Acceptance of lucrative large orders is made possible
Often, companies reject large orders because they can not buy or hold the raw materials needed to fulfill the job. With a finetrading it is possible to pre-finance the goods and in this way to handle larger orders.
7. Quickly available, additional liquidity
In practice, the company can rely on additional liquidity from sales before purchasing the supplier invoice (via the Finetrading company).
For whom is a goods purchase financing available?
Basically, a purchase financing for all trading companies and the manufacturing and manufacturing industries is interesting:
Companies that need to stock commodities with widely fluctuating prices can benefit from finetrading. You get so much better conditions through volume discounts or temporarily cheaper prices. But even fast-growing companies with short-term liquidity needs use goods purchase financing to pre-finance short-term orders. In addition, seasonal heights can be cushioned by the purchase of goods without negatively impacting the company’s own creditworthiness through bank financing.