Why commercial brokers need trade and working capital finance as an option for customers

Products provide a cash flow boost

Why commercial brokers need trade and working capital finance as an option for customers


By Jayden Fennell

As business owners battle supply chain delays and rising costs for goods, brokers need the opportunity to provide tailored solutions to help business customers overcome cash flow constraints to continue growing their businesses.

Jackie Cooper, Executive, Trade & Working Capital Business & Private Banking at NAB and Peter Bugler, Head of NAB Commercial Broker discuss.

Businesses are facing challenges ranging from supply chain delays to rising costs. In this environment, they need support from brokers to find financing solutions that allow them to expand inventory, free up cash flow, and utilise debtors or balance sheet assets to facilitate growth.

Three in 10 small to medium enterprises (SMEs) say supply chains are a significant challenge for their business and anticipate that this will remain the case for another 12 months, according to NAB’s SME Business Insights report. The best solution to the supply crisis – according to three in 10 businesses surveyed for the report – is to hold more stock and raw materials or source new or alternate suppliers.

But adapting to these market pressures has tightened cash flow for many businesses, which must pay upfront to secure inventory by ordering more stock or sourcing products from several providers.

Working capital is the lifeblood of businesses: without it they simply can’t survive. Trade and working capital solutions, such as those offered by NAB, can assist customers on growth and acquisition paths as well as those who need a facility to support day-to-day cash flow fluctuations.

End-to-end solutions

Trade and working capital financing can offer an end-to-end solution for businesses that are under pressure due to strained cash flow in their working capital cycle. With lead times increasing due to supply constraints, more businesses are confronting this scenario.

For example, the managers of one Melbourne-based wholesale grocery and food business recently approached their broker with a clear growth objective – to become Australia’s largest Asian specialty food wholesaler.

The business had been tendered with wholesale rights for three states as sole distributor of one of Australia’s most popular brands of rice. It had ordered goods from India and had six weeks to secure funding for the products before their arrival.

The wholesale business needed a trade finance solution to support its import operations, pay its suppliers, and work towards its goal of growth.

The wholesaler’s broker approached a NAB business development manager seeking a trade and working capital financing solution for the customer.

The broker was able to help the wholesaler to secure invoice and trade financing from NAB, tailored to the customer’s individual needs and cash flow cycle. The wholesale import business is now trading above its financial forecast and is in discussions with one of its main rice suppliers for a long-term partnership deal.

Finance for operations

Working capital requirements are a common barrier for importing, exporting and even domestic wholesale businesses, as the cash conversion cycle can be long – particularly in the current environment.

Trade finance works to fund the gap between incoming and outgoing payments to keep businesses running smoothly and foster their growth.

The lender may front the cost of a supplier’s invoice for a customer, who then receives the goods, sells them on and repays the loan. Alternatively, the lender may use evidence of a buyer’s order, then provide finance to enable that order to be fulfilled. The loan is repaid when the end buyer remits the proceeds.

Bridging the payment gap

Invoice finance is another funding option that can be useful in industries such as wholesale trade, manufacturing or labour hire.

This allows business customers to access finance to purchase stock or materials without securing the loan using property, such as their home or commercial premises, which many business owners are reluctant to do.

Invoice finance involves converting unpaid invoices to cash. This helps businesses to use the assets on their balance sheet to their full potential rather than relying on the owner’s personal assets for security. It suits businesses with a healthy turnover and operating track record, that have strong accounts receivable processes and systems in place.

Building relationships

As Australia’s largest business lender, NAB recognises that no two businesses are alike. Our trade and working capital specialists work with brokers and their customers to tailor cash flow solutions to meet the needs of each business.

For brokers, trade and working capital financing offers opportunities to broaden service offerings to customers. NAB has experienced a 60 per cent year-on-year increase in trade and working capital solutions referred by brokers, with many looking for a clear point of differentiation with their clients. Despite this, brokers may not have experience implementing this type of finance.

As the bank behind the broker, NAB runs regular education sessions across Australia for brokers on invoice financing and trade and working capital financing.

To build strong relationships with business customers, brokers need to be able to work with lenders to provide tailored and flexible financial solutions to help customers navigate through challenging economic conditions and grow their businesses. In today’s environment of rising costs and increasing lead times, the right funding solutions have never been more important.

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