From Farm to Table: How Invoice Financing Helps Foodstuff Exporters Along the Supply Chain

The Role of Invoice Financing for Foodstuff Exporters Along the Supply Chain

For food stuff exporters, managing cash flow is crucial to keeping the supply chain running smoothly. In an industry where timely payments and seamless transactions are essential, delays can cause severe disruptions to the entire process. This is where invoice financing, or export finance, comes in.

Invoice financing gives exporters an advance on their outstanding invoices, allowing for a flexible solution to minimize risk along the supply chain. But how can invoice financing be helpful for food stuff exporters, and how can you expand your business through international trade?

This article will explore how invoice financing can help foodstuff exporters along the supply chain to help you determine the best financial solutions to manage your cash flow and reduce risk. Let’s dive in!

What is Invoice Financing?

Before you can expand your business through international trade, it’s essential to understand what invoice financing entails. Invoice financing is an accounting strategy integral to emerging markets, referring to numerous financing options with strategic benefits and allowing organizations to borrow funds against their accounts receivable for instant cash flow. In this scenario, a business uses its invoices as collateral to receive a loan.

Invoice financing allows foodstuff exporters to navigate supply chain finance by providing quick payments for all export receivables through invoice financing. Through this method, the exporter and importer can prioritise the trade gap that imported products fill.

Why it Matters for Exporters

Foodstuff exporters might question the importance of invoice financing during their supply chain operations. Consider the following data to better understand why this solution is integral to navigating the supply chain and maintaining a steady cash flow:

• In 2017, the total sales resulting from invoice financing solutions in businesses funding their export activities with this method was £7.7 billion, up 36 per cent from 2016.
• In the same period, there was a 38 per cent rise in businesses using invoice financing for exporting operations.

What is Factoring Purchase Order Financing?

Another concept you’ll likely encounter during your exporting process is factoring in purchase order financing. Purchase order financing is an arrangement where a customer promises to pay for products in full once they are delivered. The agreement is outlined in a contract, making the total purchase order value for companies or “factors.”

Factors fund purchase orders from suppliers and provide the necessary financing to fulfill the order. Essentially, purchase order financing is received from your supplier to fill their order when you don’t have the necessary working capital.

Invoice Financing vs. Letters of Credit

While the terms share similarities, invoice financing and letters of credit are two distinct concepts essential for food stuff exporters. While invoice financing allows access to working capital for issued but unpaid invoices, letters of credit are issued by financial institutions to guarantee payment on behalf of the buyer.

Letters of credit are frequently used in transactions between importers and exporters to sell goods without risking cash flow, as they guarantee that both parties will fulfill the conditions of their agreement.

What are the Benefits of Invoice Financing Solutions?

Invoice financing solutions provide critical benefits to food stuff exporters looking to navigate cross-border trade without risking their financial well-being. Let’s explore some of the primary advantages of this solution to grow through trade finance.

Liberate Working Capital

Invoice financing solutions can provide essential working capital to food stuff exporters along the supply chain. Working capital describes the difference between your current assets and liabilities. Importers and exporters achieve working capital through trade finance, which covers any financial product used to facilitate international trade.

Trade finance includes products like trade insurance and export factoring, which follows the same principles as invoice factoring but covers overseas transactions rather than domestic transactions. When selling goods to overseas buyers, you can cash in on exports and expand your current working capital, allowing you to scale your business by liberating your capital.

Reduce Days of Sales Receivable

Invoice financing also benefits food stuff exporters by allowing them to receive payments from their sales efficiently. An invoice financing platform allows exporters to receive cash in as little as 48 hours while being paid as much as 90 per cent of the face value of sales receivable. This method means you can get significant funds back quickly,  rather than waiting long periods for your sales receivables.

Cover Operational Expenses and Finance Your Production Cycle

Money received through invoice financing is crucial to covering your current operational expenses while financing your upcoming production cycle. Because an exporter’s working capital is constantly fluctuating, it’s essential to have a steady cash flow to cover all operational costs–invoice financing provides this cash flow to help you along the supply chain.

The Proof is in the Numbers

Not sure how invoice financing can help your food stuff business along the supply chain? Consider some of the following statistics that prove the importance of this booming practice.

• In 2021, the global invoice factoring market reached a total global value of USD 1946.5 billion. This number is projected to hit USD 4618.9 billion by 2031.
• In 2021, Europe maintained the highest market share growth in invoice marketing.
• In 2019, the World Trade Organization estimated that the majority of the USD 23 trillion spent in annual global trade relied on trade finance.
• A lack of trade finance is one of the top three issues exporters face in half of the world’s countries.
• Between 2018 and 2019, international factoring volumes grew by 5.4 percent.

How Incomlend Can Help

Foodstuff exporters seeking a solution to expand their business through international trade and invoice financing can seek help from a high-quality factoring solution like Incomlend. Foodstuff exporters agree to sell their outstanding invoices to our platform and benefit from the following abilities:

• Request credit insurance coverage check on the buyers
• Receive the funds your buyers owe ahead of time
• Get paid an upfront rate of 90 per cent of your buyer’s invoice
• Receive the surplus balance of the amount received after deducting the funded amount
• Turn international invoices into cash within three days

Incomlend makes export finance easy for exporters and importers across the supply chain. Assess your eligibility or contact us today for your upcoming invoice financing solution.