A successful business relies on strong business relations throughout the supply chain. Prompt payment to your suppliers is critical to maintaining good relationships, enjoying benefits and ensuring excellent service. However, sometimes during cashflow difficulties, it can be hard to provide a prompt payment which can lead to a breakdown in your supply chain.

Fortunately, there are some supply chain finance options available, such as supplier finance which can help both you and your suppliers.

What is supplier finance?

Supplier finance is a service where a financial provider pays your suppliers on your behalf, as soon as you approve the invoice. You then repay the finance provider on your agreed terms. The fees can be incurred via either the buyer, or the suppliers:

  • Buyer-led: with buyer-led supplier finance facilities, the buyer incurs the charges. Often the suppliers are paid on the agreed terms however the facility allows the buyer to extend their payment terms with the supplier financier.
  • Supplier-led: with supplier-led finance facilities, suppliers have the flexiblity to opt-in to early payment from the buyer, paying an agreed discount fee for the benefit.

As suppliers also have to manage their cash flow too, many will welcome a chance to ensure predictable payments. With this in mind, you may be able to negotiate with your suppliers for them to pay the small fee to the finance provider in order to receive quick payments.

How does supplier finance work?

Fortunately for many businesses, it is easy to begin a supplier finance facility;

  1. With GapCap, you can register online and receive an offer within 24 hours.
  2. Onboard your chosen suppliers. GapCap makes this easy with a simple e-sign on a single document.
  3. When a supplier submits an invoice, you then approve the invoice when you are happy
  4. The finance provider will then provide an early payment to your supplier. For GapCap customers, this is usually within 24 hours of invoice approval.
  5. You then repay the finance provider on the agreed date.

Is your business eligible for supplier finance?

Different finance providers will have different eligibility requirements. GapCap has three main requirements in order for clients to be accepted. These are:

  • The business must have been running for over two years
  • The minimum turnover requirement is £1 million
  • The business must be a UK limited company.

Three benefits of supplier finance with GapCap?

  1. Complete flexibility

We know that every business is different, which is why we’ll spend time working with your business to create suitable terms and payment dates. Furthermore, you have complete flexibility with the suppliers that you want to add to the facility. You can add as many or as few suppliers as you like. GapCap also allows you to turn the facility off and on whenever you want, giving your business complete control and flexibility.

  1. Bolster your supply chain

Reduce the risk of a broken supply chain system by creating happy suppliers through prompt payments. Strengthened supplier relationships pave the way for better deals and improved supplier systems that can benefit your business. A healthier supplier ecosystem makes it easier for you to do business with your clients.

  1. Improved cash flow

Supplier finance benefits the cash flow of both your business and your suppliers. Suppliers enjoy a healthier cash flow as with GapCap they can receive payment within 24 hours of invoice approval. Your business can also better manage its cash flow thanks to longer payment terms, allowing your invoices to be paid before you pay your suppliers. What’s more, supplier finance can be used alongside other financing options too.

To find out more about supplier finance, get in touch with us to discuss the best business financing options for your needs.