The business of importation can be quite lucrative. That’s because you’re getting goods at low prices from other countries and selling them for a profit. But while it’s possible to earn good money from the importation business, you’ll definitely need capital to get into it and continue operating.
How Money Flows in Importing Business
Most manufacturers will need you to prepay for products before you can get them. On the other hand, your customers may take 30 to 60 days before paying for products. This leaves you with a financial challenge because the business needs to continue running. To solve the issue, here are the different types of import financing you should look into.
Asset Based Loan
In this type of import financing, you sell your accounts receivable or credit accounts to the financing company. Usually, you will be required to sell your accounts receivable at a discount. This can mean selling them at 80 to 90% of your credit accounts’ value. The financing company will give you an advance payment at a fee, allowing you to have access to capital to keep running the business.
Use Inventory
Inventory financing is an effective way of funding an importation business. Here, you secure a loan using your current inventory, and therefore have access to cash to get goods that your customers need. It’s a great strategy because it enables you to increase your inventory without affecting your cash flow as long as you’re able to service your loan. The three types of inventory financing you can consider include floor planning, blanket inventory lien, and field warehousing.
Purchase Order Financing
Purchase order financing is almost similar to factoring accounts receivable. However, in this case, you sell your purchase orders and invoices to the financing company, which will take responsibility for billing and collecting money from customers. Once the products are manufactured, the financing company collects money from customers and takes its cut, then pays you the profit. Learn more about purchase order financing when considering this type of funding.
These types of import financing can help you access cash and maintain your working capital. Are you in this line of business and wondering where you’ll get the capital to keep running the business? Talk to Speed Funding. Our financing company will walk you through your options, allowing you to make an informed decision.