Importing pertains to the process of bringing in goods or services from another country. They come from foreign countries and are usually brought in for resale. Many companies find this type of business quite attractive since the products or services from other countries are really affordable and they can be resold for a nice profit margin.
Although the process of importing and reselling goods seems like a simple concept, entrepreneurs who are considering starting this kind of business will have to overcome various hurdles. One of these is finding the right financing solution.
At present, there are various finance solutions or methods you can choose from. The most recommended one by finance experts are:
Factoring in accounts receivables.
Also known as asset-based loans, this method involves selling your credit accounts or accounts receivable to a bank, lending company, or other financing institution. Accounts receivables are usually sold at a discount, between 80-90% of the face value of your credit accounts. An advance payment will be given to you by the factoring company, about of 2-3%, for the accounts you would normally have to wait on for payment.
Purchase order financing.
This method has similarities with asset-based loans. The main difference with this financing solution is that you take your invoices or purchase orders and assign or sell them to a financing company. This company will then assume the risk and the task of billing and collecting. When the goods are produced, the financing company collects the payment from the customers, takes its cut of the proceeds, and pays you the profit. This option is highly recommended if your profit margin is high enough on the goods you are importing. Having a good and reliable supply chain and creditworthy customers are important factors to consider as well.
Although inventory financing is an expensive solution, it is still a highly effective way of financing an importing business. Under this method, you will have to use your present inventory to secure a loan that will permit you to buy the imported goods your customers want or need. Because of this, you can effectively increase your inventory without impacting your cash flow. However, with this option, it is crucial to make sure that you can service or repay your debt. Inventory financing comes in three types: blanket inventory lien, floor planning, and field warehousing. Choose the type that best meets your requirements.
Canadian business, during its search for new and innovative financing solutions keeps hearing about asset loans and accounts receivable financing solutions. These two types of financing for Canadian business owners and financial managers are a subset of what is known as an asset based line of credit.
The financing is newer to Canada, growing in traction and popularity, and still widely misunderstood as a total financing strategy for your company. Let’s clarify some of those myths and explore some of the benefits of these terms.
One of the main differences of an asset loan is that typically is financed through a non bank arrangement. You should seek this type of loan if you are unable to generate sufficient working capital to finance your business in a traditional Chartered bank environment in Canada.
In essence your receive financing and operating facilities, depending on how they are structured, around the various asset categories of your business – the two main asset categories are:
In many circumstances you can also leverage equipment, and occasionally real estate.Clients then ask us why this is different from what they are used to – which is bank financing around these same assets. The answer is that a very strong focus is placed on the true underlying value of your assets – less reliance is placed on balance sheet rations, loan covenants, outside collateral, etc.
Most leases and operating facilities in a traditional bank environment are very cash flow focused. The irony of these types of calculations is very evident to the business borrower – that irony being that historical cash flow is used to forecast future cash repayment abilities. That quite often doesn’t work for many companies who are experiencing temporary challenges.
Asset loans, and asset based lines of credit focus on the collateral. Many clients we deal with have the collateral in A/R, inventory, purchase orders and new contracts, equipment, etc but can’t satisfy traditional cash flow lending requirements. That is why they are prime candidates for an asset loan, an asset based line of credit, or at its simplest and most basic form, a receivable financing that fully margins their accounts receivable with no set limit on future growth.
So now we understand what the facility is. How does it work on a day to day basis our clients ask? The answer is simply that it’s a facility that goes up and down, frankly every day, with your borrowing needs. As your receivables and inventory fluctuate you draw down against their current value. This optimizes the amount of cash flow and working capital available for sales growth and profit generation.
The security mechanisms around these facilities are very similar to any type of bank financing – that is to say that a first charge lien is placed on the assets being financed. Advances rates on accounts receivable and inventory are established and as cash is advanced and then repaid by your customers the cash is turned over to pay down your revolving balance. It’s as simple as that. The true beauty of the facility is that as you grow your facility grows with you – that is probably the most powerful aspect of such a financing.
These working capital facilities, predominately A/R an inventory based are becoming more traditional in nature ever day. Speak to a trusted, credible and experienced advisor in this area – if you are not getting the financing you need to grow and prosper competitively then this type of solution may be exactly hat you are looking for.
All successful businesses should have Financing Solutions, Merchant Banking Services, and business support. Regardless of whether the business is a sole proprietorship or a major corporation, the answer to expanding financial capabilities will be found in the best combination of the three. But how do you find the best financial partner to fill your needs?
While most large corporations partner with merchant banking services to finance mergers, acquisitions, and to give valuable financial advice for complex financial deals, smaller businesses usually depend upon merchant services to provide credit, debit, and gift card processing services. The goal for partnering is to increase revenue by accepting a wider range of customer payment options. Many times, the merchant services will help to organize and simplify business operations with timely financial advice.
Looking for the merchant banking services that offer solutions to business needs in your particular industry is a good use of time. You should find the bank that specializes in your industry. Many will state the industries that they best serve. If your business is a match, then you have the best chance of getting the help you need.
Some standard industry specializations include restaurants, retail stores, services which take tips such as salons or limos, mail or phone order businesses, trade specialists such as contractors or mechanics, lodging, e-commerce merchants, and professionals such as doctors or accountants. Each of these businesses needs a slightly different kind of merchant banking services. And all of these businesses will require specialized financing solutions at some point in time.
Some common payment solutions include point of sale payment terminals, Internet and phone payments, gift and incentive cards, mobile commerce payments, and general purpose reloadable cards. Good merchant services allow businesses to use the best suited to their needs, while offering relevant educational opportunities, updates and business news to help you keep current with news, technology and products. You may expect that the best merchant services are capable of providing for local and global clients.
Depending on the size of your business, you may need a merchant that is capable of processing a full range of payments. This may include checks, or debit, check, gift, and smart cards. You should expect the merchant to cover financial activity reporting as well as giving advice for lowering overall costs of acceptance for these various payment types.
Larger businesses may consider using a merchant that can also consolidate and manage accounts through one client manager.
One significant merchant service that is crucial is education concerning reducing risk and data security. An excellent service will provide ongoing information to help its business clients conduct financial transactions safely. Learning about data security standards should be included. Webinars, current news bulletins, and data security alerts should all be part of what is offered through the best merchant services providers.
Financing solutions, Merchant Banking Services, and business support is best when the most amount of resources are available. Do look for partners that will provide the things your business needs and more. Your success will depend upon expert advice and you deserve to have the best possible.
To run a company efficiently, it is crucial to have complete access to the supplies and equipment needed to successfully compete within an industry. A trucking company will fail without trucks, a retail sales business needs computers for inventory and registers to assist consumers in making a purchase, and a dentist’s office cannot effectively provide dental procedures to patients without the right specialized dental equipment.
While businesses need the proper equipment to function and compete within an industry, many businesses do not have the funding to fork over thousands of dollars to purchase these crucial pieces. Many businesses do not realize there is a solution for acquiring new equipment or for replacing outdated equipment through leasing. By taking advantage of equipment leasing, companies can get the supplies they need, even if they do not have the funds to purchase them outright.
The Advantages Of Leasing Equipment
There are many advantages to equipment leasing. The following three benefits in particular show how leasing can make more sense than buying. First, many leasing companies offer fast approvals, allowing a business to get the equipment they need quick. Second, leasing provides businesses with beneficial stepped payment plans, custom and flexible terms, and seasonal schedules.
Lastly, there is much less paperwork with equipment leasing. Typically, a business only needs to fill out a short application to get the process started. Most companies that lease equipment directly review and approve applications, so there is no need to sit and wait by the phone for a credit approval company to give the thumbs up. Equipment leasing companies do not have to follow the same regulations required of banks. That means businesses will most often receive competitive rates that will not bust their budget.
Any company requiring the purchase of expensive equipment should consider the benefits and cost effectiveness of equipment leasing.
The Advantages Of Financing Used Equipment
Another option for businesses interested in equipment leasing is used equipment financing. Businesses who cannot function without necessary specialty equipment, but who have a problem financing due to limited cash flow, should consider financing solutions. Used equipment financing offers businesses a way to purchase the high quality equipment needed on a budget.
Used equipment financing is provided for businesses in a large list of industries, including seasonal, recreational, transportation, restaurant, landscaping, office, computer, industrial, construction, and more. Through used equipment financing, businesses short on cash can still purchase the equipment needed but avoid the high cost of new equipment. New companies often have a hard time obtaining financing simply because they are a new company. By purchasing used equipment through a financing company, a business can still startup with quality equipment while avoiding the debt often brought on by purchasing new equipment.