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Generating cash on your terms
Ebury Partners Trade Finance offers a different approach to supplier fi nance, specifi cally aimed at alleviating some of the main challenges which toy companies face. John Baulch reports.
signifi cant challenges for toy companies. For starters, the toy market is a seasonal industry, with a high percentage of sales geared to the second half of the year. Compounding that is the fact that orders have to be placed – and paid for – long before the main selling season. With an increasing number of retailers looking for extended payment terms, a clear picture emerges: goods have to be ordered and paid for many months before the supplier will receive the money for them. Working capital has traditionally evolved towards the back end of this cycle; for example, there are numerous companies who will offer funds after the invoice has been raised, but this doesn’t help to actually fund the inventory purchase in the fi rst place. All of which makes the service being offered by a new player to the market particularly interesting. Ebury Partners is a currency specialist, regulated by
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the Financial Conduct Authority, which has over 20 years experience in the market. In conjunction with its existing currency-based products, the company is now looking to help fi nance international trade and optimise the supply chain and working capital cycle through a new facility which it will be launching in January. Alex Hambrook explains more: “We have put together a specifi c programme targeting some of the challenges faced by toy companies. Our approach is to come into the supply chain at a much earlier stage, benefi ting both the supplier and the factory. “We’re a trade fi nance specialist, not a bank. We’ve
raised our own money to lend on an unsecured borrowing basis, so there is no confl ict with a supplier’s existing bank or fi nance relationships. We’re looking to lend to SME’s with a minimum turnover of £1m a year, which have established relationships with their vendors. We can provide our clients with a 120-day trade credit limit up to £500k, allowing time for the goods that they have purchased abroad to be imported and paid for by their customer before they need to repay us. This will deliver signifi cant cash fl ow and working capital benefi ts. The factory will receive payment directly from Ebury Partners with no further cost or liability to them. This may allow suppliers to negotiate preferential prices and terms from the factory, as it effectively makes the supplier a cash buyer.” It’s not just the client which will benefi t from the
arrangement: there are major advantages for the manufacturer too. The facility will work wherever in the world the factory is based. When a transaction is confi rmed and the products supplied, the
hen it comes to fi nancing their operation, the traditional pattern of buying and selling within the toy trade provides some
manufacturer will receive immediate payment for its goods or services, bringing greater trust and effi ciency to the partnership. Payments are fast and transparent, removing exchange rate fl uctuation risk and enabling manufacturers to be paid in their preferred currency. The Supplier Finance solution is a simple fi ve-step
process: •
• • • •
Step 1 – The supplier and manufacturer register with Ebury partners.
Step 2 – The supplier and manufacturer agree transaction details.
Step 3 – The supplier receives and approves the goods.
Step 4 – Ebury Partners pays 100% of the invoice value to the manufacturer
Step 5 – The supplier settles the invoice with Ebury Partners up to 120 days later
I asked Alex a few questions about the process:
TW: Who is the service for? AH: Currently we accept suppliers based in the UK and manufacturers anywhere in the world. Soon we expect to be able to offer services to the rest of Europe, and in time to the rest of the world. Right now we accept suppliers with an annual turnover of £1m-£150m. As a general guideline, we look for a minimum of two years’ healthy trading record. Suppliers would need to have a minimum of two years transaction history with their selected manufacturers.
TW: What credit limit and transaction size is typical? AH: Credit limits range from £100k to £500k. Minimum value of the fi rst transaction between supplier and manufacturer is £40k. Some customers combine multiple smaller purchases into single larger transactions.
TW: If a supplier has a number of manufacturers they trade with, do they all enrol on the programme? AH: Yes, but it is a very simple process. And there is no restriction to the number of enrolled manufacturers which a supplier can trade with simultaneously within the arranged credit limit.
TW: How much does it cost? AH: We have no joining fee, no annual fee and no on-going fee. Our only cost is the fi xed fee charged to the supplier for each transaction. There are no costs to the manufacturer.
TW: What do you see as the major benefi ts to the supplier in this arrangement? AH: We see it being a major help in mitigating the impact of the extension of customer payment
Alex Hambrook managing director
terms. It will help to improve relationships with the manufacturer, and enable the supplier to pay for goods sooner without affecting its existing banking relationship. The enhanced working capital should also give the supplier stronger buying power.
TW: How is Ebury Partners Trade Finance different to other fi nance solutions in the market? AH: We don’t ask for security from either party. The pricing is transparent and simple. Using our FX expertise, we pay the manufacturer in their preferred currency and reduce exchange rate fl uctuation. Ultimately, we are providing working capital and risk management to the supplier, and immediate liquidity to the manufacturer.
TW: How can suppliers fi nd out more? AH: They can email us at tradefi nance@
eburypartners.com or call us on 020 3267 60110, and we’ll be happy to help.
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