For many Canadian businesses who don’t use financing tools for support, maintaining stable working capital is a full-time job, even when the only objective is to maintain their regular supply, and do the work in front of them. This makes growth extremely difficult. After all, it’s expensive to expand a business’ production capacity enough to take on the large new customers they need to grow. A business that’s looking for more than that, and is hoping to grow, establish itself and make a mark on its industry, needs financial support to do it.
Traditionally, the answer to this problem has been purchase order finance. However, the process involved in using it is clunky, time consuming, and expensive to use. This gives it situational and reactive utility at best, and makes it poorly suited to quickly driving growth proactively. Fortunately, Canadian businesses have gained access to a growing number of alternative finance solutions in the past decade, and are no longer limited to this kind of limited toolkit. Fifo Capital has developed its import finance facility specifically as a way for businesses to drive growth more easily, quickly, and cost effectively, whether it’s to fill an existing purchase order, or to boost supply for a larger purpose.
Purchase order finance is too unwieldy
Purchase order finance is designed to insulate the financier from risk, but it limits what businesses can do, and how effectively they can use the funds they get. Before it can get financing, the business needs to provide the financier with a customer’s purchase order. Because international payments can take some time to execute, the business may also need their financier to send a letter of credit to the supplier to guarantee future payment. The financier then pays the supplier, who drop ships the product directly to the end customer.
The sheer number of steps involved in accessing financing, placing an order, and getting the product shipped to the customer inherently make the process slow and prone to additional complications. Fifo Capital’s import finance resolves this by greatly simplifying the entire process.
Import finance cuts through the complexity
Rather than explicitly helping a business to fill an order, import finance focuses more specifically on the core of the issue: helping businesses get the supplies they need to fill orders. Instead of providing a purchase order from a customer, businesses can simply use import finance to immediately pay any supplier anywhere in the world. With supplier payment taken care of, the supplies are shipped to the business, not their end customer, giving them more control over what imported goods are used for.
Making business more efficient
Where purchase order finance is usable only to fill an existing customer order, import finance can be worked into larger growth efforts to help expand a business’ production capacity, to reduce production costs, to limit the impact of cash flow interruptions, and to enable growth.
Driving growth proactively
Businesses don’t always need a customer order to know that it’s time to invest in additional supplies. Seasonal factors, larger market changes, or the implementation of a marketing campaign can all predictably affect sales figures. This allows them to prepare strategically and proactively, instead of reacting after a purchase has already been made.
Encouraging financial stability
Import finance is also a great way to keep a business’ finances stable, and ensuring that expenditures remain predictable during a growth phase. It means that businesses can acquire the supplies they need to grow, even while applying their current working capital to other growth efforts, or to maintain current operations.
Economies of scale
Using import finance, businesses aren’t limited to filling a single customer’s order. After all, financing isn’t tied to an individual purchase order, and the supplies purchased are shipped to the business itself. Once there, these can be shipped to various customers, repackaged, or processed to produce new products. This means businesses can purchase in bulk, and pay sooner than they would otherwise be able to. That provides them with significant bargaining power, driving down supply costs overall. As a result, businesses can save more capital for other purposes, or to price their own products more competitively.
Import finance can, of course, be used simply to get the funds a business needs to fill a purchase order. More than that, however, it’s a way for businesses to strengthen their supply chain, and to enable growth that would otherwise remain out of reach. Import finance allows them to proactively and strategically support growth plans independently of any single client, or any pre-existing purchases.