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By: Peter Bugler, Head of NAB Commercial Broker and Jackie Cooper, Executive, Trade & Working Capital Business & Private Banking, NAB.
Brokers are well placed to support business customers facing cash flow constraints due to supply chain delays and rising input costs with end-to-end finance solutions.
Maintaining a healthy cash flow is essential to maintaining a healthy business. But in today’s environment of supply chain delays and rising input costs, businesses are facing cash flows constraints that are challenging their ability to grow.
Disrupted supply chains pose a significant challenge for three in 10 small to medium enterprises (SMEs) and this will remain the case for another 12 months, according to NAB’s SME Business Insights report.
Three in 10 businesses surveyed for the report said the solution to this challenge was to hold more stock and raw materials or source new or alternate suppliers. But this means paying upfront to secure inventory, which can throw the cash flow cycle out of balance.
Trade and working capital finance, such as the end-to-end solutions offered by NAB, provide brokers with an opportunity to help businesses confronting this scenario.
Restoring the cash flow balance
Trade and working capital solutions allow businesses to expand inventory, free up cash flow, and utilise debtors or balance sheet assets to facilitate growth despite challenges in the operating environment.
Invoice finance, for example, allows businesses to convert unpaid invoices to cash. Cash can be used to purchase stock or materials when required. By activating these balance sheet assets, invoice finance removes the need for owners to offer personal assets, such as their home or commercial premises, for security.
This solution can be useful in industries such as wholesale trade, manufacturing or labour hire. It suits businesses with a healthy turnover and operating track record, that have strong accounts receivable processes and systems in place.
Trade finance is another option for bridging the gap between incoming and outgoing payments to keep businesses operating and growing.
With trade finance solutions, the customer uses borrowed funds to cover the cost of a supplier’s invoice. The customer then receives the goods and sells them on, repaying the loan after the sale to an end customer.
In some trade finance arrangements, the lender may provide funds based on evidence of a buyer’s order to enable that order to be fulfilled. The loan is repaid when the end buyer remits the proceeds.
Tailored solutions
Each business is unique. As Australia’s largest business lender, NAB’s trade and working capital specialists have a strong track record of working with brokers and their business customers to tailor cash flow solutions to meet their individual needs.
In one recent example, NAB provided finance to a Melbourne-based wholesale grocery and food business that needed funding to support its aspirations of becoming Australia’s largest Asian specialty food wholesaler.
The business had been tendered with wholesale rights for three states as sole distributor of one of Australia’s most popular brands of rice. It had ordered goods from India and had six weeks to secure funding for the products before their arrival.
The wholesaler’s broker approached NAB seeking invoice and trade financing that could be tailored to the customer’s cash flow cycle.
The solution NAB was able to provide allowed the import business to meet its commitments and build its business. The wholesaler is now trading above its financial forecast and is in discussions with one of its main rice suppliers for a long-term partnership deal.
Trade and working capital financing offers brokers an opportunity to differentiate their service offerings and to help business customers to grow. As the bank behind the broker, NAB runs regular education sessions across Australia for brokers on how to make best use of this specialist area of finance.
NAB has experienced a 60 per cent year-on-year increase in trade and working capital solutions referred by brokers as more brokers seek to differentiate themselves with their clients.
As businesses work hard to grow in an environment of rising costs, supply chain delays and cash flow constraints, brokers have never been more important in facilitating access to flexible finance solutions. Trade and working capital solutions provide businesses with finance to operate and grow at the time when they need it most.
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