New Zealand exporters often find themselves facing gaps in cash flow. Often, this is due to the challenge of managing the delay in receiving payment for product delivery.
With international customers often requiring 60 or even 90-day payment terms, this can place significant working capital pressure on small and medium sized enterprises (SME) working in export and trade.
Invoice Finance is a customisable financial solution for Kiwi exporters to bridge gaps in cash flow, enjoy advanced access to the money owed to them and turn their overseas sales immediately into working capital.
Learn more about ScotPac’s business finance solutions for New Zealand exporters.
Why Do Kiwi Exporters Struggle With 90-Day Payment Terms?
Exporters trading to overseas customers, whether in Asia-Pacific, Europe or North America, are often required to operate on extended payment cycles.
Between the time it takes to ship goods around the world to the need to maintain strong, positive relationships with customers, 90-day payment terms are not abnormal for Kiwi exporters.
But this means that there can be months between the need to send goods and products ordered and the time when one can reasonably expect payment. This delay puts strain on cash flow and SMEs relying on incoming payments can find themselves struggling to fund production, meet the cost of scaling operations, payroll, or even ordering more materials.
Why are there 90-day payment terms for Kiwi exporters?
There are a few reasons why this long payment cycle is common in the trade industry.
- Importers, i.e., the offshore customers, understandably want to wait to actually receive the products or goods ordered before approving payment
- Larger importers prefer lengthy payment cycles as it helps them manage their own cash flow more effectively
- Currency exchange risks and compliance delays can add additional days to delivery which then requires this to be built into the payment terms.
For Kiwi exporters, without faster access to cash from the invoices they have issued customers, ongoing operations can be affected or new contracts may need to be declined. Or, in other cases, new market opportunities for expansion may be missed.
Invoice Finance bridges this cash flow gap by advancing funds against outstanding invoices.
How Can Invoice Finance Help Exporters Manage Cash Flow?
Invoice Finance allows exporters to receive up to 85% of the value of their invoices as soon as the invoices are issued. This means that the bulk of the money owed can be accessed and used without having to wait months for payment.
Invoice Finance provides immediately accessible working capital to help:
- Fund operations, payroll, stock or material orders, or growth
- Maintain regular cash flow
- Reduce reliance on costly overdrafts or short-term loans
- Remove uncertainty from cash flow forecasts.
Does Invoice Finance Work for International Transactions?
The short answer is yes.
ScotPac’s Invoice Finance can be tailored for Kiwi exporters. It effectively smooths over the long payment gap that is typical of exporting and importing.
How does Invoice Finance work to facilitate international trade:
- You ship the goods and products ordered by your customers overseas.
- Issue your invoices to your customers and submit those invoices to ScotPac for financing.
- Receive up to 85% of the value of your submitted invoices.
- Once your customers settle their invoice, you receive the balance, minus a small fee.
How Can Exporters Qualify for ScotPac Invoice Finance?
Here at ScotPac, our lending specialist team will assess your current invoice ledger, outstanding receivables, and export contracts to tailor a solution that meets your current and projected growth.
Eligibility for Invoice Finance with ScotPac depends on a number of factors:
- You need to be a Kiwi exporter trading with other businesses
- You need to have a demonstrable record of at least 6 months of consistent operations and invoicing
- Your customers need to be creditworthy with a reliable payment history
- You will need to export a minimum of $10,000 worth in invoices per month
- You will need to be a registered business in New Zealand and issue invoices in New Zealand dollars
Are There Alternatives to Invoice Finance for Exporters?
Some Kiwi exporters consider overdrafts or working capital loans, but these options have a number of restrictions Invoice Finance doesn’t, such as:
- Fixed assets for collateral
- Fixed repayment schedules
In comparison, Invoice Finance offers:
- Speedier access
- No collateral other than the outstanding invoices themselves
- Expandability as your sales grows
- Customisation for exporters, wholesalers and international trade businesses
The core difference is that Invoice Finance offers an advance on your accounts receivable by converting your export invoices into liquidity, without you having to take on more debt, utilise assets or restrict growth.
What Makes ScotPac’s Export Invoice Finance Different?
For one thing, ScotPac is the largest non-bank lender in New Zealand and Australia.
For another, we currently support over 9300 businesses and fund $26.3 billion in invoices each year.
With over 35 years of experience, our lending specialists are experts in working with SMEs in exporting to find a customisable and flexible working capital solution for them.
How Can Kiwi Exporters Get Started with ScotPac?
If you’re looking for a custom working capital solution or your business, we recommend an introductory consultation with our team. This will give us a chance to review your outstanding invoices, client base and business objectives. We can then help to customise a potential solution that is personalised and focused on your needs and situation.
Steps to apply:
- Enquire online or request a callback from ScotPac’s export finance specialists.
- Complete our 5-minute online application form
- Receive approval from our team of specialist lenders
- Start submitting invoices for financing
