Trade Finance

Also known as working capital finance, business finance is often used as a bridge between a business that has the potential to borrow and the stock they need to sell to clients.

In either export or inventory financing, borrowers will need to provide details of purchase orders to support their loan submission. This and any other supporting documents are typically essential to getting funding for manufacturing and shipping to clients. In terms of import and inventory financing, the services are typically short-term and fit the working capital cycle of the borrower.

Additionally, in either type of finance, lenders will often fund the purchase of the stock and demand that the repayment be settled by the end of a short period of time. These loans usually have fairly short terms that suit the business’ working capital cycle, which in most cases, is somewhere around 90 to 120 days. Also, borrowers will often have to be clear on what stocks they want to buy, even if they don’t have purchase orders from clients just yet.

Working capital for business Expansion into United States of America

Lena is the owner of a successful manufacturing business in Melbourne, Australia. After significant growth in the domestic market, Lena has identified opportunities to expand into the USA. She believes that her business will thrive in the US market because of its unique products and innovative production process.

Lena estimates she will need $5 million to start operations in the US market, which will cover the cost of setting up a new manufacturing facility, hiring staff, and marketing. As Lena’s business is relatively new, she does not have enough capital on hand to finance the expansion.

After researching different finance options, Lena approached Sherwood Finance and we engaged international lender who has a firm presence in both Australia and the USA.

The lender requires Lena’s Australian manufacturing facility to be used as collateral for the loan, so should Lena default on the loan, the lender would claim ownership of the facility.

With the international lender’s finance in place, Lena can start operations in the US market. With the help of a local business consultant, Lena can set up a new manufacturing facility in downtown New York and begin assembling her team.

Over the next five years, Lena’s business operations in the USA experience tremendous success. She can repay her loan on time, generating strong returns for both her and the lender. Lena now has a thriving manufacturing business in both Australia and the USA, and is looking at options to expand into new markets.

Plant & Equipment finance

The manufacturing company specialised in producing customised metal fabrications for commercial and industrial clients. The company has been operating for five years and has experienced steady growth. However, the current manufacturing equipment is outdated and becoming too inefficient to keep up with the increasing demand. The company owners have decided it’s time to invest in new plant and equipment to keep their business competitive.

The company has sought financing to purchase a range of new equipment to include a computer-aided design (CAD) system and laser cutting machine. Through their research, they have determined that the best way to finance equipment purchases is through a term loan from a local bank. They prepare detailed financial projections and present their business plans to the bank.

The bank asks for further detail on the purpose of the loan and, after due diligence; they have approved the loan of $200,000 at an interest rate of 6% with a repayment period of five years. Someone will use specifically the loan to buy plant and equipment.

With the financing in place, the company can move forward with the purchase of the new equipment. Implementing the CAD system has improved the efficiency and accuracy of the company’s design process, and the laser cutting machine has increased productivity and the ability to produce higher quality products. The investment has increased their competitiveness and set them up for long-term growth.

The loan has been structured well, and the company has planned repayments in line with their cash flow forecasts. The interest on the loan is tax deductible, further improving the overall financial position of the company.

Overall, the investment in the new plant and equipment has been a success and has allowed the company to adapt to the challenges of the market, remain competitive, and continue on a sustainable path of long-term growth.

Plant & Equipment finance

A construction company seeking leasing.

A large construction company that specialises in infrastructure and industrial projects. With several large-scale projects in the pipeline, they needed to upgrade and expand its plant and equipment fleet. This will not only enable them to undertake bigger projects, but also provide a competitive advantage by improving efficiency and safety in operations.

They approached Sherwood Finance to seek finance for the purchase of new plant and equipment. We asked for a detailed proposal that outlines the company’s financial standing, credit history, and future projections.

To secure the funding, the construction has organised its proposal into several sections that cover:

1. Introduction: An overview of the construction, its history, and its current operations.
2. Financial Forecast: A detailed analysis of financial history, including balance sheets, income statements, and cash flow statements. The proposal should also include a forecast of future financial projections based on projected business growth.
3. Market Analysis: A detailed analysis of the construction market, including trends, opportunities, and competition. The analysis should also highlight how the new plant and equipment will help the company gain a competitive edge.
4. Plant and Equipment Plan: A detailed listing of the plant and equipment that they intend to purchase, including the make and model of each item, price, and expected lifespan. The proposal should also include a plan for the maintenance, storage, and security of the new assets.
5. Repayment Plan: A detailed repayment plan that outlines how they intend to repay the loan, including the interest rate, repayment schedule, and collateral for the loan.
6. Conclusion: A summary of the proposal, highlighting the potential benefits of the new plant and equipment and why its a sound investment.

By providing a comprehensive proposal that shows its financial standing, market positioning, and plans, the construction can secure the financing it needs to expand its plant and equipment fleet. This will enable the company to undertake larger, more complex projects and gain a competitive edge in the construction market.

Invoice Financing

Company Background:

A medium-sized mining company that operates multiple mines across different regions. The company mines precious metals like gold and silver. They have been operating for the past 10 years and have built a reputation for being a reliable player in the industry. However, as with any business, they have faced challenges along the way.

Problem Description:

They had been experiencing difficulties with cash flow management since the beginning of the current financial year. The primary cause of this was because of uncontrollable factors, such as the global economic slowdown, inflation rates, and unfavourable changes in foreign exchange rates. These factors led to declines in market demand, reduced export sales, delayed customer payments, and unexpected inflation of operating expenses.

The company had little access to working capital financing options to counteract the challenges. Despite efforts to maintain reserves, the situation had caused a significant impact on the company’s profitability. The management team was concerned about the possibility of a cash flow crisis and needed a funding solution that would enable the business to continue operating.

Solution:

To meet the operational requirements for the medium-term and strengthen the business’ operational capabilities, the company sought external financing options. They approached several providers for secured and unsecured business loans. Although they had a high credit score, they failed to meet the criteria for these financing options because of insufficient collateral.

After exploring multiple options, the company considered invoice financing. This alternative financing route allows businesses to leverage unpaid invoices for immediate cash flows. We offered the company invoice financing up to 80% of their invoice value at a reasonable fee of 3%. The company agreed to the terms and received the funds within five business days.

Result:

With invoice financing, they could meet its working capital requirements, which resulted in improved cash flow management. With the additional funds, the company could fulfil recurring expenses and shareholder payout obligations while continuing its ongoing mining operations. As a result, the company could improve its efficiency, reduce borrowing costs, and maintain a stronger cash reserve.

In conclusion,

the invoice financing option provided a unique solution to the working capital challenges faced by the Company. This financing option allowed the company to maintain its operations and maximise profits. As the company continued to grow, the management team became more confident in their decision to choose alternative finance options to enable the business to tackle any future challenges.

Supply chain finance

Company details

An international manufacturing company based in Asia with a global supply chain. The firm had to tackle multiple supply chain issues, including lengthy payment cycles to their suppliers and insufficient and slow invoice processing, leading to limited access to working capital.

What did the client want?

To address these challenges, the company implemented a supply chain finance program. The program involved partnering with Sherwood finance to provide early payment to their suppliers for a small discount, which helped improve cash flows for both parties. The product provided the company with greater visibility in their supply chain, helping them manage their suppliers more effectively.

What did we do?

Decentralising supply chain finance was a solution which helped company to meet its financial objectives while also enabling it to maintain strong relationships with its suppliers. By optimising its various financial resources, the company could build a more secure and reputable supply chain while also streamlining its financial processes.

The results

1. Improved cash flow: The early payment options provided by the financial institution improved cash flows for both the company and their suppliers, reducing the intensity of financial stress and increasing their financial stability.
2. More efficient processes: The automated supply chain finance program streamlined invoice processing and payment processes, reducing errors and delays. The payment process was more transparent, making it easier to monitor and follow payments, resulting in fewer disagreements between suppliers and the company.
3. Strengthened links with suppliers: The early payment option with helpful rates and minimised paperwork strengthened vendor/supplier links between the company and their suppliers. Offering suppliers flexible financing options earned the company a preferred buyer status from key suppliers, strengthening their supply chain alliances.
4. Decreased operational costs: By automating processes, the company minimised costs related to invoice processing and payment, freeing up extra time and resources to oversee the entire supply chain decreased

Invoice Finance

Company details

A manufacturing company that experienced significant growth in recent years, leading to a significant capital crunch. With long payment terms from their clients, they struggled with managing cash flow and keeping their operations going. All the while, they were enlarging their customer base at an alarming rate, creating even more difficulties to keep on top of their invoices.

What did the client want?

To address their short-term financing needs, they implemented an invoice finance. Sherwood Finance was engaged to give early access to receivables, with a small fee being paid in return, thus enhancing their cash flow and making sure that they could gain the required funds when they needed them the most.

What did we do?

With implementing invoice financing, the business continued its operations, overcome its capital crunch and manage receivables. By optimising its financial resources and processes, the company could improve cash flows and secure the necessary funds for future business growth.

Results

By choosing invoice financing, the company could gain the following perks:

1. Faster cash flows: By leveraging invoice financing, the company could speed up their payment cycles for receivables. This reduced the time gap between invoicing and payment and enabled them to receive funds faster, avoiding any cash flow issues.
2. Better working capital: With the funds in hand, the company ABC could continue with investments into human resources, research and development, and technology infrastructure. This working capital could manage daily expenses and create new growth chances.
3. Flexibility: The invoice finance offered the company a flexible solution for short-term financing needs. They could choose which invoices to finance, depending on their working requirements.
4. Improved customer relations: By providing convenient invoice financing options, the company could offer their customers flexible payment terms, enabling them to build long-term relationships with them.
5. Administrative efficiencies: The invoice finance program automated accounting processes, saving time, and effort in record-keeping and accounting work.

Trade finance for international company

Company details

An importing and exporting company that engages in importing machinery from foreign suppliers and then selling those products to local customers. To facilitate these transactions, the company needed to access trade finance facilities that would enable them to pay their international suppliers while waiting for payment from their local customers.

What did the client want?

To address these challenges, the company implemented a trade finance program with a financial institution. The program involved working capital financing options that allowed the company to access financing facilities based on their trade receivables and trade payables. This helped them improve cash flow and manage their working capital more effectively.

What did we do?

Utilising trade finance was a smart move for the company. It helped the company enhance liquidity, manage working capital, and minimise the risks of import-export transactions. The trade finance program enabled the company to support their growth objectives with confidence, secure more business opportunities, and stay ahead of their competitors.

The results

1. Enhanced liquidity: The trade finance facility provided the company with the funding to pay their international suppliers upfront, which helped to improve cash flow and enhance liquidity. This boosted their creditworthiness and allowed the company to finance new deals.
2. Flexibility: The trade finance allowed the company to utilise a range of financing options that were aligned with their specific needs. They could choose from a variety of products such as letters of credit, factoring, and supply chain finance, depending on their requirements.
3. Reduced risk: By utilising these financing options, the company could minimise the risk of payment delays and defaults. This helped to secure their transactions and supported their growth objectives.
4. Operational improvements: The trade finance program automated and streamlined companies’ complex transactions. This eased the burden of their back-office functions and allowed them to focus more on expanding their customer base and continuing their trading operations.
5. Improved relationships with suppliers: The trade finance facility strengthened relationships with international suppliers by enabling Company to pay them. The supplier’s trust in the company increased, leading to better commercial terms and stronger business relationships.