Supplier credit: practical pre-financing of your orders
Many companies in Switzerland are faced with the same problem: on the one hand you have to pay suppliers quickly, and on the other hand, customers pay 30, 60 or 90 days. The result is an imbalance between collection and expenditure. Faced with this problem, supplier credit presents itself as a modern and practical financing technique.
Finance orders with supplier credit
How does supplier credit work? Your company purchases goods from business partners. Normally, you must pay these within the time allowed. Supplier credit consists of financing your orders through a financial partner: the factor. The factor settles the invoices of your suppliers for you within 24 hours, while you reimburse the amounts within a generous period. This system has several advantages:
- Your suppliers are guaranteed to be paid. This gives you a better basis for negotiating discounts and lower purchase prices.
- You benefit from a payment period of up to 120 days for reimbursement to the factor. This gives you more financial flexibility.
- You can order at any time, even if the liquidity required for payment is not currently available.
- The liquidity of your business increases because the outflow of funds is slower = positive cash flow.
- A supplier credit is therefore doubly useful: your cash flow improves because you do not have to pay for your order immediately and you also benefit from discounts and rebates from your suppliers.
For more information, Fiesta Financing offers a page dedicated to supplier credit / reverse factoring and the possibility of free contact by a specialist!
What is factoring?
“Supplier credit” is a simplified term for the financial principle of reverse factoring. Factoring is a financial concept still little known on the Swiss market, but in full expansion. With “classic” factoring, receivables resulting from the sale are financed by the factor. In other words, so-called “classic” factoring allows immediate cash collection without waiting on customer payment. There are in fact several types of factoring:
- Classic factoring: pre-financing of sales invoices. The seller is paid by the factor, who in turn is paid by the customer. It is a purely B2B solution.
- B2C factoring: works in the same way as the classic variant, but it can also be used to pre-finance invoices for private customers (B2C = business to customer).
- Supplier credit or reverse factoring: the opposite principle, according to which it is not customer receivables which are pre-financed, but supplier invoices.
Within the factoring family, there are already various special products that meet all different needs. We recommend that you contact a factoring specialist to learn more about the nuances of factoring.
The advantages of factoring: an example
Do you run a commercial company that sells delivered products, mainly to companies (B2B) and, to a lesser extent, to individuals (B2C)? As a distributor, you are always dependent on deliveries from your business partners, which you must pay as quickly as possible. You therefore opt for classic factoring for B2B and B2C customers as well as for supplier credit. Your business benefits from your decision in several ways:
- With supplier credit, your orders are settled within 24 hours. You benefit from a payment period of 120 days from the factor.
- You collect the product of the sale within 24-48 hours. This will significantly speed up your income.
- The result is faster cash flow, more cash, and more flexibility in your financial planning.
Advice from a specialist
Factoring solutions such as supplier credit are highly specialized financial products that can be tailored to your business. For this reason, full advice and a precise analysis of the business are necessary before the conclusion of any contract. We recommend that you contact a specialist who can perform such analyzes professionally. For example, Fiesta Financing Services offers factoring solutions with the analysis of the corresponding file so that you receive a suitable product. In any case, we recommend that you contact an expert before committing.