Products | Working Capital Solutions

Unlock your access to cash

Unlock your access to cash that is tied up in outstanding debtor invoices with Merchant West’s Working Capital Solutions. Our facilities are flexible and designed to help your business grow with cash flow management and planning. These solutions cover everything from placing orders with suppliers to raising funds against unpaid trade debtor invoices.

We offer the following solutions to help increase you working capital and improve your day-to-day cash flow:

Full Book Invoice Discounting

How it Works

Merchant West Working Capital Solutions purchases the client’s full Debtors Book, and the client cedes the rights and claim to the underlying debt to Working Capital Solutions. Based on the composition of this Debtors Book, we can advance up to 80% of this Debtors Book in the form of a revolving working capital facility. This facility remains confidential, and the debtors in the book are not notified of the cession of the debt or the existence of this facility.

Making use of this product, the client is appointed as Working Capital Solutions’ Collection Agent. The client continues to manage and collect on the Debtors Book in the course of the business, and Working Capital Solutions takes ownership of the client’s Debtor Collections Bank Account.

The client is able to make requests for draw-downs on this facility, and interest is only charged on the outstanding balances in the facility – similar to a bank overdraft facility. When Debtors settle their outstanding invoices, and the outstanding balance is settled on the facility, Working Capital Solutions will release the 20% Retention money, less the applicable interest charge.

Benefits

  • Increased liquidity in line with your credit sales, enabling you to take advantage of business growth opportunities.
  • Ability to settle trade creditors earlier and obtain higher settlement discounts.
  • Obtain more favourable prices on bulk or increased order quantities placed with your suppliers.
  • Access to immediate cash to help ease seasonal cash flow problems and requirements.
  • Converting unpaid invoices into cash, which prevents you from having to grant excessive early settlement discounts to your debtors to encourage earlier payments.
  • Expert credit control advice on the underlying debtors.
Single Invoice Discounting

How it Works

The client begins by identifying one or more specific Debtors to include in this facility.

Merchant West Working Capital Solutions purchases the current and future invoices raised to these Debtors, and the client cedes the rights and claim to the underlying debt to Working Capital Solutions.

Working Capital Solutions will advance up to 80% of the outstanding invoices, provided that the invoices are accompanied by Proof of Delivery/Performance.

This facility is disclosed, and each Debtor will sign a Tri-Partite Letter acknowledging the cession of the debt. From there the Debtors will pay the outstanding invoices into a Working Capital Solutions bank account, the details of which are provided in the Tri-Partite Letter. Working Capital Solutions charges a Discount Fee per 30 days, which is a percentage of the full invoice value, inclusive of VAT. Upon settlement of the invoices by the Debtors, Working Capital Solutions will release the 20% Retention money, less the applicable Discount Fees.

Benefits

  • Increased liquidity in line with your credit sales, enabling you to better take advantage of business growth opportunities.
  • Ability to settle trade creditors earlier and obtain higher settlement discounts.
  • Obtain more favourable prices on bulk or increased order quantities placed with your suppliers.
  • Access to immediate cash to help ease seasonal cash flow problems and requirements.
  • Converting unpaid invoices into cash, which prevents you from having to grant excessive early settlement discounts to your debtors to encourage earlier payments.
  • Expert credit control advice on the selected debtors.
Purchase Order Finance

How it Works

Working Capital Solutions, through our Purchase Order Finance product, can pay the client’s suppliers on the client’s behalf, according to the payment and INCO terms stipulated by said suppliers. These payments are only made on the back of confirmed Purchase Orders from the client’s Approved Debtors, or for an Asset Finance client. The suppliers can be either local or foreign entities. ‘Payment’ can be facilitated by way of a Letter of Credit or Telegraphic Transfer.

The products, for which Working Capital Solutions is paying, have to be finished products, meaning there must be no performance risk as a result of the client’s valued-add to the product.

Working Capital Solutions charges a Purchase Order Finance Fee per 30 days, which is a percentage of the full suppliers invoice value. The Purchase Order Loan is settled when the client raises invoices to its Approved Debtors, or when the Asset Finance agreement is activated.

Note: Purchase Order Finance can only be offered to a client if there is a form of guaranteed local off-take – this can be in the form of a Full Book Invoice Discounting Facility, a Single Invoice Discounting Facility, or an Asset Finance Agreement.

Benefits

  • Our Trade Finance department can assist with off-balance sheet finance, which is made available to you to take advantage of business growth opportunities.
  • Hedging and management of foreign exchange risks are mitigated by our Capital Markets division.
  • The risks associated with importation are identified and advice is provided to mitigate the risks.
  • Funding can be raised against irrevocable orders before the delivery of goods has taken place.
Stock Finance

What It Is:

This funding solution provides you with upfront financing for any local or international stock/commodity procurement needs. The lend here is not subject to confirmed off-take, and the maximum duration of short term loans is 180 days.

Risks Attached:

  • Stock Finance solutions are seldom offered to clients and working capital funding is only subject to post performance debtors balances (Debtors Finance), thus providing suboptimal LTV% relevant to stock and debtor valuations.
  • The absence of Stock Finance solutions may lead to the inability of clients to timeously secure supplier discounts.
  • Not pairing FX Risk Management with suitable Stock Finance solutions results in increased Cost of Sales and suboptimal GP Margins.

Business Value Add

  • Provide capital and value against stock holding.
  • The ability to gear and leverage unfunded Foreign Debtor Balances.
  • Management and guaranteed enhancement of overall GP Margins.
  • Competitively priced facility.

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