AR Cash Flow Launches Trade Finance Subsidiary
AR Trade Finance, a non-banking wholly-owned division of AR Cash Flow, has launched a new suite of products aimed at facilitating SME’s – specifically importers – to have access to finance.
According to AR Cash Flow’s National Sales Manager, Daniel Dunsford, restrictions in bank loans to SMEs necessitated the development of the service. ‘This is a logical extrapolation of our core business. Lack of assets or a poor credit history need not be barriers to growth. Importers with firm orders or legitimate opportunities should talk to us. This is a time for financiers to be pragmatic, not parochial.’
AR Trade Finance offers SMEs up to 5 options of funding as well as Letters of Credit. These include: Purchase Order Finance, Inventory Finance, Invoice Discounting and Progress Payment funding for construction. “Access to banking is a topical issue in Australia, as in many countries, reflecting concerns that the banking system only serves preferred segments of the business market.’ Dunsford said. It is against this background that the subsidiary was launched.
“Dunsford said another benefit of this type of funding is that it is short term – it can suit every stage of growth in the business cycle.”
“Short term funding is flexible and easy to use.” He said. “It can help the company when there is a slump in the market. Moreover, the client’s financial commitment expires after payment, which means they are not tied-down as they would be through a long term bank loan.” Through Purchase Order Finance, funds are given to a client who has been awarded a tender or contract to supply a stated commodity (tangible goods for importers) at a stated price and to a specified destination. These terms are agreed upon by all parties through a Letter of Credit, which AR Trade Finance can create on behalf of clients or ratify from third parties.
AR Trade Finance, funds the cost of goods from the client’s supplier of choice, domestically or internationally. The purchaser could be government, a public or private company. The funds are used to purchase the products to be delivered with the expectation of being paid by the purchaser once the payment is due after product delivery. On the other hand, Purchase Order with Guarantee is when AR Trade Finance issues a guarantee to pay after the supplier has delivered. The negotiation is done between AR Trade Finance and the supplier. A physical draw-down of the loan is done after delivery of goods to reduce performance risk.
Invoice Discounting is a short term funding arrangement extended to the borrower for finance of the borrower’s stock and other working capital requirements based on the borrower’s accounts receivables. The discounted amount is up to 80% of the value of the acceptable accounts receivables. For many small or growing businesses, accounts receivables is their most valuable asset as it can be turned around to finance new business through invoice discounting.
Article by: James Starr
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