How To Take Advantage of Supplier Financing

Supplier financing is a situation in which a supplier delivers the goods or services to the buyer using some type of deferred payment scheme.  This has benefits for both the buyer and seller, and is common in many situations.  However, if you are an entrepreneur just starting out, it could be hard to get supplier financing, since it is typically saved for big customers or those with a thorough track record, which you are probably neither.  However, there are some things you can do to find out the supplier finance options available.

The Benefits of Supplier Financing

The are several benefits of supplier financing for both the buyer and the seller.  For the buyer, you can get goods now, and pay later.  This means that you have time to either resell the goods, or use them to create your product, and try to get that product to market before the bills are due.  If you are able to get the goods and sell them before the bills are due, you could have no out-of-pocket expenses, which allows you to put your resources elsewhere.

Sellers also have a benefit in granting these types of financing offers, because the supplier can sell more goods in a shorter period of time.  Most transactions of this type carry some type of insurance, so the seller does have some security of getting paid.

How to Get Supplier Financing

The easiest way to get supplier financing is to just ask.  Many salesmen are in business to make the deal work.  They may be in the position to make the sale contingent on certain terms, such as financing.  If not, there are banks that specialize in trade finance that may be able to help.  They can offer financial solutions and a wide range of factoring and accounts receivable management services.  If you are a new entrepreneur, you may not be able to get generous financing terms, but if you start small, and prove that you are a valuable and reliable customer, you may be able to go back and get better terms with each sequential deal.

By building a relationship with your supplier, you can get better financing over time.  If you are in a niche that has several highly competitive suppliers, you could even try to play one off the other, and see if you can get better terms in the end.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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