Supply Chain Financing

Do you sell a physical product with sales over $150,000?

Regardless of the size of a business, cash flow management is and always will be an important aspect of a business’s entire operation. Without proper cash flow management, businesses may find it difficult to cover recurring expenses and pay suppliers for the production of goods. It’s important to note that even the most profitable businesses fail when cash flow is mismanaged.

To avoid business failure, there are a plethora of financial solutions that businesses can choose from to help them maximize their working capital and fund expansion projects. In this article, we will talk about supply chain financing and how it can help businesses streamline their expenses. Read on to find out more!

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Why choose Kickfurther for

Supply Chain Financing?

Don’t pay until
you sell.


Your payment obligation only begins once your sales are made. This alleviates the cash-flow pinch that lenders cause without customized repayment schedules. Free up capital to invest in scaling your business without impeding your ability to maintain inventory

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funding.


Know your rates. When you compare ours, you’ll often see that you’re saving. We cost less than factoring, PO financing, and many lenders. We also have higher limits than competitors.

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in an hour.


Once approved and the deal goes live, most deals fund within a day (often within minutes to hours), so you’ll never miss another growth opportunity.

It’s easy, it works, &
it grows with you.


Companies access higher funding limits and often get lower rates as they return to Kickfurther, creating a scalable solution that grows alongside your company.

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Supply Chain Financing

What is supply chain financing?

Supply chain financing, sometimes referred to as supplier finance or reverse factoring, is a funding solution that involves a third-party financing company serving as a middleman between a supplier and a business. This type of financial arrangement enables businesses to take advantage of more favorable payment terms and mitigate potential risks that may result in cash flow issues. Suppliers also benefit from supply chain financing as it allows them to receive payments ahead of time.

When done correctly, a supply chain financing agreement is a win-win solution for both businesses and suppliers as a third-party financing company closely monitors the transactions. This enables businesses to focus on their core expertise while optimizing their working capital.

How does supply chain financing work?

As mentioned above, supply chain financing involves three parties: a buyer, a third-party financing institution, and a supplier. Supply chain financing is usually triggered by a buyer issuing a purchase order, suppliers issuing invoices, or whenever goods are shipped from the supplier to a buyer. If you’re wondering how supply chain financing works, check out the example below:

  • Before an agreement happens, both the buyer and the supplier needs to undergo a due diligence process to determine if both parties are eligible to access this type of financing product
  • Once the due diligence process and both parties have been deemed eligible, a buyer would then enter into an agreement with a financial institution that provides supply chain financing services
  • Supply chain financing is then triggered when a supplier sends their invoice to a buyer
  • Once the invoice has been approved and payment terms have been agreed upon, the third-party financing company will then advance a portion of the supplier’s payment
  • At maturity, the buyer is required to pay the full amount to the third-party financial institution
  • Once the full amount has been received, the financial institution will then pay the remaining balance to the supplier

While this may sound like an oversimplification of the supply chain financing process, it’s a great start for owners that are interested in using supply chain financing as a strategy to streamline their cash flow management processes. It’s the perfect arrangement for all parties as the buyer can negotiate the payment’s terms, the supplier gets their money in advance, and financing companies can take advantage of discounted rates. For a more concrete example of how supply chain financing works, check out the next section.

Example of supply chain financing:

If you’re still unsure about how supply chain financing works, here’s an example:

  • Let’s say that company X buys goods from supplier Y.
  • Supplier Y issues an invoice to company X with a specified payment date (could be 30, 60, or 90 days)
  • Once company X approves the invoice, financial institution Z will then send a portion (usually 80%) of the payment to supplier Y
  • At maturity, company X then pays the total amount to financial institution Z
  • Financial institution Z will then pay the remaining amount to supplier Y to complete the transaction

Why use supply chain financing?

Supply chain financing is available to most companies as long as they meet the necessary criteria. Typically, companies that use supply chain financing are those in the manufacturing or distribution industries. This type of financing option helps them fund various operations while keeping their working capital at a healthy level. If you’re wondering whether your company will be able to qualify for supply chain financing, here are some of the most common qualification requirements you should know about:

  • Must be in business for more than two years
  • Must have excellent credit rating
  • Must be able to provide proof of good financial standing
  • Must have great relationships with your suppliers

What are the advantages of supply chain financing?

For suppliers:

  • Suppliers receive payment for their invoices earlier
  • Better way of obtaining additional funding with lower associated costs
  • Win-win solution for all the parties involved
  • Improved cash forecasting accuracy

For businesses:

  • Ability to leverage assets to improve cash flow
  • Less costly financing alternative compared to other asset-based loans
  • Allows businesses to better manage their supply chain
  • Allows businesses to mitigate risks associated to supply chain management
  • Supply chain financing supports business growth

Are there disadvantages to using supply chain financing?

As mentioned above, supply chain financing is a rare win-win solution for all parties involved. However, there are a few disadvantages to supply chain financing that businesses and suppliers may want to consider. Here are some of them:

  • Not all companies may be eligible to avail of supply chain financing solutions
  • Financing can only be used to purchase products or raw materials

Are there alternatives to supply chain financing?

The reality is that supply chain financing may not be compatible with all businesses. This type of financial product may prove to be difficult to acquire for businesses that haven’t been in operation for long or businesses that may not have the best credit score. The good news is that there are other financing options available out there that may be a better fit for your business’s unique needs. Let’s talk about alternatives to supply chain financing:

Traditional term loans

Term loans are simply loans from financial institutions such as banks, credit unions, and online lenders. What makes a term loan ideal is that it has a fixed repayment schedule that borrowers need to pay back with interest. This makes monthly costs more predictable and enables businesses to better manage their cash flow. The only downside is that this type of loan may only be available for more established businesses as businesses with bad credit or poor cash flow may not be able to qualify for its requirements.

Business lines of credit

A business line of credit works best if your business requires regular access to additional funding. Like term loans, lines of credit are offered by banks, credit unions, and other traditional financial institutions. Typically, lenders approve a specified amount of revolving funding for businesses to access as needed. The biggest advantage of a line of credit is that borrowers only pay interest on the amount that they have borrowed rather than the whole available amount.

Business credit cards

Similar to lines of credit, business credit cards enable businesses to access a revolving line of credit to finance various types of business expenses. One huge advantage to using a business credit card is that borrowers can take advantage of perks, points, and cash-back rewards. However, you may want to think twice before availing a business credit card as this type of financing option does not have the most flexible payment terms.

Crowdfunding

Crowdfunding is a relatively new method of raising funds. It’s more commonly used by startups and small to medium-sized businesses to fund a business idea or an expansion project. The way crowdfunding works is that businesses ask a pool of people – often friends, family, and the general public – for small amounts of money in order to meet a certain monetary goal. Apart from having a great product, businesses must also ensure to put enough time and resources into planning a campaign strategy to ensure crowdfunding success. If you’re interested in financing your inventory needs through crowdfunding, consider using Kickfurther.

How can Kickfurther help your business?

Kickfurther is an inventory financing platform that puts a unique twist on the crowdfunding phenomenon by allowing businesses to streamline their inventory expenses with the help of a community of individual investors. This innovative platform works by enabling businesses to launch campaigns aimed to pique the interest of the Kickfurther community and allow individual backers to fund their inventory purchases. Rather than taking out a traditional financing loan, businesses can tap into their pool of supporters and when the business sells its inventory successfully, individual backers get paid. If you need more information about Kickfurther, visit www.kickfurther.com.

How does Supply Chain Financing Work?

Connect with consumers across the United States to get your
inventory funded via our marketplace

Create your online account

Create a business account, upload your business information, and launch your deal

Get funded within minutes to hours

Once approved, our community funds most deals within a day, often within minutes to hours, so you’ll never miss another growth opportunity.

Control your payment schedule

We pay your manufacturer to produce inventory. Make the introduction and you’re off and running! Outline your expected sales periods for customized payment terms. At the end of each sales period, submit sales reports and pay consignment profit to backers for each item sold.

Complete and repeat!

Complete your payment schedule and you’re done! Often once the community knows you, you’re likely to get lower rates on your next raise.

How much funding could your company raise?

Submit this form to see your estimate.

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US Entity/Owner?
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$2500000
$0$5000000

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