International suppliers and buyers can free up their working capital with Stenn International’s cross-border supply chain financing that gives businesses extended payment terms without putting cash flow pressure on supplier or buyer.
Availability of liquid cash or capital is the life blood of any business and it stands true for both – supplier as well as the buyer. Talk to any manufacturer/ supplier and you are bound to find atleast one mention about receivables stuck with the buyers, while the buyers are always on the lookout for suppliers who offer flexible and convenient payment terms.
As cross-border supply chains have criss-crossed the globe with multinational buyers on one side and an ever-expanding group of suppliers and manufacturers on the other, businesses are increasingly under pressure to free up the working capital imprisoned in their supply chains.
To ensure both manufacturers and buyers do not face capital crunch a new concept of trade financing has been rolled out by Stenn International, a UK-based trade finance provider. Stenn helps buyers by making payment to their suppliers within 5 days of shipment. There is no need for trade insurance and the risk of nonpayment by customers are taken on by Stenn. The buyer can pay back to Stenn on flexible terms.
As the supplier gets instantly paid (by Stenn) for the goods it supplies to the buyer and the buyer gets more flexible terms of payment at Stenn, the concept creates a win-win situation freeing up huge working capital for both parties. Stenn does not require collateral or guarantee from the buyer. Most importantly, it saves the supplier the trouble of chasing payment from the customers.
The concept is simple, Stenn International’s crossborder supply chain financing gives businesses extended payment terms without putting cash flow pressure on supplier or buyer.
STENN optimizes cash flow by permitting businesses to lengthen their payment terms, allowing the buyer to optimize working capital whilst the supplier generates immediate additional operating cash flow.
No cost to the buyer
STENN pays the supplier upon shipment by purchasing their invoice issued to buyer, at a small discount. When the invoice matures and payment is due, buyer pays STENN the face value of the invoice. Thus, the cost of STENN’s financing is absorbed by the supplier.
Benefit to the supplier
Working with STENN will often lower the cost to the supplier because STENN’s discount is typically lower than their local cost of financing. Predatory lenders that flourish in Asia’s manufacturing regions can charge 4-6 per cent per month, making STENN a more cost effective solution that provides safe and reliable working capital to support growth.
Benefit to importers
For the importers, Stenn offers credit terms of up to 120 days. Allowing importers to defer cash outflow, improve cash position, liquidity and financial ratios. It allows importers to sell the products before paying for it. There is no need for Letter of Credit and save on bank charges. It is of no cost to the importers and allows a greater choice of suppliers globally. There is no use of the importers valuable bank credit lines. STENN offers extended payment terms up to 120 days from any supplier in Asia, Latin America or other emerging markets.
Improved credit line
When providing the supplier with a letter of credit, you tie up availability under your existing credit line. Making purchases through the use of an L/C is a cumbersome process that exposes parties to discrepancies and excessive fees. STENN allows for a simplified payment method via open account. Excessive bank debt reflects adversely on your balance sheet. When using STENN’s supply chain finance program, you are able to reduce these borrowings. All purchases made through this program are recorded as trade payables.
No use of insurance limits
Suppliers that offer open account terms to their buyers often will utilize trade credit insurance to mitigate their credit risk. Unfortunately, there are not many insurers in the marketplace and there is generally a fixed capacity for credit limits granted by these insurers. A trade finance facility that relies on insurance will ultimately take up any existing insurance limits that would otherwise be available to other suppliers. Stenn however performs its own underwriting and does not rely on the approval of banks or insurance companies. Stenn does not use this insurance limit capacity.
Improved just-in-time stock management
Stenn’s flexible financing system gives buyers more control of inventory management and procurement since STENN typically grants higher limits than traditional sources of financing.
Better choice of suppliers
Many suppliers capable of giving better price and/or quality are either unable or unwilling to give delayed payment terms. STENN enables buyers to receive favourable credit terms from suppliers overseas. With STENN, importers are able to source goods directly from manufacturers without having to use agents, intermediaries or trading houses.
These intermediaries are used by factories that lack the working capital to sell directly to stronger buyers. By utilizing STENN’s Supply Chain Finance solution, buyers experience increased purchasing power which allows for increased margins due to lower cost of goods.
Purchase order financing
STENN also supports its client through purchase order financing whereby a letter of credit is issued to suppliers based on confirmed purchase orders from approved buyers.
This product is best used for companies that need additional working capital during expansion or peak seasons. This is a valuable tool used by suppliers when they need pre-shipment financing for production as they are able to monetize the L/C locally to fulfil the purchase order.
Stenn’s financing process
Stenn performs credit analysis of suppliers and buyers to set a financing limit on the buyer and determines the appropriate discount rate based on sales volume, tenor of invoice and buyer credit quality.
A recent survey by international treasury specialist EuroFinance shows that of more than 200 major firms polled, 27 per cent already have a supply chain finance program in place and that figure is expected to double in the near future. Stenn has been supporting SMEs in emerging countries and MNC buyers from US and Europe. More SMEs from emerging countries are applying for invoice factoring services with Stenn.
