This accounting client is a fast growing, profitable wholesaling business.
The bank has been providing an overdraft facility for several years. The client was looking to bring on more employees and increase purchase orders for the growth. However, the client wanted to free up their personal property portfolio which the bank had as security.
The bank offered to increase the existing overdraft facility as the client’s property security was strong, but this didn’t fully resolve the working capital issues that the business had, due to the difference in timing between having to pay suppliers through to receiving customer/debtor payments on the other end.
The accountant approached OptiPay for a solution and in the end an equipment finance facility was put in place with the same bank, in order to free up cash and allow the client to repay the overdraft and hence release the property guarantees.
The client, off the back of purchase orders received, then implemented OptiPay’s Supply Chain Funding by utilising OptiPay’s money to pay suppliers “cash on delivery”, in order to take advantage of a 6% early settlement discount.
When the client delivers the goods to its customer/s, the Supply Chain Funding provided by OptiPay was then repaid from an Invoice Finance facility that OptiPay implements with the client. The buyer then cleared the invoice finance funding when their customer/s pay (as per their normal 45-day trading terms).
This solution provided an immediate improvement in GP margins (difference between the 6% settlement discount and the small fee charged by OptiPay) and eliminated the working capital required, by only having to repay OptiPay the net amount owing, 45 days later, when the customer paid our client.
The supplier funding from OptiPay allows flexible fundings and redraws on an ongoing basis.
The facility has limited recourse and no property security was required.
What the accountant said: “We initially thought the bank was the best option for our client, but we’ve learnt something new and genuinely feel we have added real value to our client and his business thanks to the innovative funding solutions provided by OptiPay”
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