In an increasingly competitive market, business owners have to be responsive, innovative, and flexible enough to keep up with consumer demands. Many companies respond to this pressure by adopting strategic growth initiatives that improve operational efficiencies, optimize the customer experience, and leverage the latest technologies. An international trade finance company can help achieve these initiatives by maximizing working capital across the entire supply chain. In turn, business owners can invest cash flow in more opportunistic ways.
Small and medium-sized enterprises (SMEs) often find themselves in a predicament. These businesses lack the immediate financial resources necessary to execute their strategic plans. While companies are waiting for invoices to be settled, they have less available funds for fueling growth objectives. This is where trade finance services like supply chain financing offered by supply chain finance providers can come in to help accelerate cash flow for them.
How Supply Chain Financing Works
Supply chain finance, also referred to as reverse factoring, provides businesses and their supply chains with short-term cash flow solutions. Financing is scalable, reduces payment times significantly, and minimizes credit risks. Buyers benefit from longer payment terms, while suppliers receive early payment.
As a result, companies and their suppliers are able to achieve more favorable financial positions. With balance sheets cleared of trade debt, all parties involved have more room and resources to pursue expansion.
How to Use Working Capital to Transform a Business
Once the issues surrounding short-term cash flow are resolved, businesses can start focusing on initiatives that lead to future growth. Consider some of the following ways access to these funds can help a company grow.
Foster a Highly Skilled Workforce
One obstacle that significantly hinders business growth is the lack of skilled staff. The advantage of having a highly-trained workforce is essential for sustainable long-term growth. However, many SMEs are missing the funds necessary to train and retrain talent.
Nowadays, technology is evolving at a rapid pace, and businesses can’t afford to fall behind on training initiatives. Supply chain financing frees up extra cash that companies can spend on workforce education. Such programs can keep employees engaged while preparing your company to enter new revenue-generating international markets.
Maximize Company Value
Business owners often search for ways to increase value to shareholders by improving their working capital. Optimizing payment terms enables companies to obtain more favorable cash flows, which ultimately increases share values. At the same time, enterprises gain financial agility that allows them to overcome volatile market changes.
A better Return on Investment (ROI) is another advantage of leveraging supply chain financing. This number indicates the value-producing potential of a business relative to shareholders’ invested capital. Bridging the gap between the incoming and outgoing cash flow aligns buyer and seller needs, creating a foundation for future growth.
Improve Operating Efficiencies
Adopting digital capabilities that improve operational efficiencies is often paramount to achieving business expansion objectives. Updating legacy systems and investing in critical IT equipment are often the first steps toward reducing costs and enabling productivity that drives growth. In many cases, these efforts correlate directly with a company’s ability to acquire new customers.
As a priority to achieving sustainable growth, businesses need to have the capacity to fulfill the demands and responsibilities of increased customer activity before they can reap the benefits. Adopting the right technology solutions go hand-in-hand with workforce training and building the required competencies that leverage these systems effectively.
Strategic Mergers and Acquisitions
Many long-term company growth plans include Mergers and Acquisitions (M&As) that expand a business’ capabilities or product portfolio. The right partnerships can give a company the competitive edge it needs to broaden its horizons. At the same time, mergers enable an enterprise to leverage local and regional expertise. This knowledge is often critical to unlocking a new market’s potential.
Implementing a supply chain finance program is an ideal way to gain quick access to working capital and fund these deals. Acquiring capabilities externally, rather than developing them internally, is one of the fastest ways a business can achieve growth, especially in the manufacturing industry. Typically, companies can fund these M&As partially or entirely using the newly available working capital.
Funding Your Future with Supply Chain Finance
Sustainable growth requires investments that enhance future performance. Supply chain financing funds future success for companies and their suppliers by increasing working capital. With the help of international trade finance companies, business owners can strategically leverage additional funds to proactively pursue growth objectives. At the same time, the risk of credit discrepancies and fees that could negatively impact your bottom line is minimized.