Trade Finance outperforms Diesel Account

A recently settled deal demonstrated how a Trade Finance Facility provided a Logistics Company with flexibility over a generic Commercial Fuel Account.

The Logistics provider was looking at two different options for the business – Growth and Margin improvement.

Growth – Was stalled as the business was not able to extend its credit terms with the Petroleum supplier. Therefore the business sought various options on how this could be aligned with business aspirations and available contracts in the market.

Whilst a traditional Overdraft could provide a greater level of funding this meant tying up the Directors personal assets (Property). The client’s Broker contacted Moneytech for a potential solution and the quick response was a Trade Facility. The business had solid financials with evident net worth & profitability.

This justified an insurance backed Trade Facility as a lend against the business itself without the need for additional collateral security. The funding obtained outweighed the Fuel Account and also offered extended terms which worked in greater harmony with the companies cash flow.

The Trade Finance Facility could now clearly enable the business to continue to grow without the concern of how they fuel growth moving forward.

Margins – Whilst the business was trading profitably the Directors were always looking for answers to minimise overall expenses.  Now, as we know all finance facilities come at a cost, but it’s what you do with the finance that makes all the difference.  In this case the applicant took the opportunity to negotiate with its existing Petroleum supplier.  The business was able to secure a bulk account and have the supplier install a tank at the clients depot.

This resulted in a number of benefits –

  • for the Petroleum supplier it secured the client for a longer term at greater volume, whilst also minimising risk by taking the Credit Account off their balance sheet.
  • for the Logistics Company it created a double benefit –
    • running a bulk fuel account provides substantial discounts over and above a general supply / credit account. The level of savings would ultimately outweigh the cost of the Trade Facility.
    • the other key benefit is having a tank onsite at the depot reducing down time as the trucks can be refuelled as and when required and not reliant on waiting on a tanker to arrive to fuel multiple trucks at one time. This can be a considerable time factor with trucks parked and employees / contractors standing around for hours at a time (reduction in hourly wage and subcontractor expense over an extended period meant margins again could be improved).

Whilst most people associate Trade Finance with purchases from overseas suppliers it is
important to remember the facility can also provide substantial advantages when used for local suppliers for example, Transport, Civil / Earth-moving, Crane Operators, Plant Hire, Rental Companies, etc.

To find out more about how Trade Finance could help your business check out our Trade Finance product page,  talk to your BDM or broker.