Trade Finance can help eligible NZ importers fund supplier payments before stock is received and sold. Some suppliers require a deposit before production or shipment. Discuss the deposit, balance payment and timing with ScotPac to establish whether the proposed transaction can be funded.
Where suitable, Invoice Finance can complement Trade Finance by providing an advance against eligible unpaid business-customer invoices after sale. Together, the facilities can help manage different stages of the cash flow cycle, subject to their terms and limits.
➔ Explore Trade Finance for NZ supplier payments
How Does a Supplier’s Deposit Create a Cash Flow Gap for NZ Importers?
A supplier may require a deposit well before the goods are manufactured, delivered or sold. This creates a cash flow gap because you must pay for stock before receiving the related sales income. Paying a deposit meets a contractual requirement but does not guarantee production or delivery.
For a small or growing importer in New Zealand, funding suppliers from the business’s own reserves can impact an ability to cover payroll, other operational expenditure like rent, or overheads in general.
ScotPac can assess whether Trade Finance is suitable for the proposed supplier payments, including any deposit and balance. The amounts and payment stages need to be agreed as part of the approved arrangement.
How Does Trade Finance Work and Cover Supplier Payments?
Trade Finance can pay a supplier directly for an approved transaction. Payment timing depends on the agreed supplier terms, funding structure and conditions.
ScotPac offers funding of up to 100% of an approved order’s value for up to 150 days. The amount available and payment schedule depend on assessment and the facility terms.
Repayment terms can be tailored to the trading cycle. You must still repay under the agreed terms if delivery or sales take longer than expected.
For New Zealand companies, Trade Finance funds both overseas imports as well as procurement through domestic suppliers, and is available in New Zealand dollars, US dollars, and other currencies.
How Does Trade Finance Follow Your Import Payment Cycle?
Trade Finance is designed to work with your order rather than operate apart from it.
A deposit-and-balance arrangement may follow this pattern, if approved:
Purchase order secured
First, you agree to your purchase order and settle on terms with your supplier. This includes deposits, balance payments and timing.
Pay the deposit
If advance deposit funding is approved, ScotPac pays the agreed amount when the funding conditions are met. Confirm any contribution your business must make before committing to the order.
Pay the balance
The balance may also be funded at the agreed stage, subject to the approved structure and required documentation. Payment timing must be confirmed with ScotPac and the supplier.
Stock received and sold
Once the stock arrives, you can sell it to customers. Repayment remains due under the agreed facility terms, so allow for the possibility that sales or customer payments may be delayed.
Planning the funding around the transaction can help coordinate supplier payments and expected receipts. You should also budget for fees and any expenses outside the approved funding.
A practical example
A New Zealand homewares importer wins shelf space with a national retail group for its next season range. The overseas supplier will not begin production without a 30 percent deposit, with the balance due when the container is loaded. That is 2 payments out of the business before a single unit reaches a shelf, and the retailer will not pay until the goods have been delivered and invoiced. Where the transaction is approved, both payments can be funded at their agreed stages, in New Zealand dollars or in the currency the supplier invoices in. The deposit and the wait for payment are 2 separate gaps, and they are funded at 2 separate points.
How Can Invoice Finance Work Alongside Trade Finance?
ScotPac can assess whether a combination of Trade Finance and Invoice Finance suits your importing business.
Trade Finance supports approved supplier payments before the related customer receipts arrive.
Then once you sell your goods to your customers, a new cash flow gap emerges: Your customers may only pay at the end of your trade terms. This, in New Zealand, can take weeks if not months. During this time, the working capital owed to you is locked up in the unpaid invoices.
ScotPac NZ Invoice Finance offers access to up to 80% of the value of eligible unpaid invoices, subject to approval and facility terms. The remaining balance is released after customer payment, less applicable fees.
Used together where suitable, the facilities can support the purchase and sales stages. They do not guarantee that every business expense or cash flow gap will be funded.
How do you get started with Trade Finance?
When looking for a finance provider for your Trade Finance solution, there are a number of questions you should be asking.
- How will the facility be structured and work with your payment cycle and supplier’s terms?
- Which currencies are required to match your supplier’s invoices?
- What documentation is needed during the application?
- How can you scale the facility if your order volumes grow or your suppliers change their terms?
With ScotPac, you can enjoy flexible terms and funding of up to 100% of the order value, international support and capital in almost any currency. To find out more about how Trade Finance can work for you, speak to our lending specialist today.
