Factoring Case Studies, How Stenn helps its Clients and can help your Business

Trade finance or factoring is a mechanism that frees capital delivering positive cash flow brings value to both export Sellers and import Buyers of any commodity.

Through factoring, Buyers can gain a credit facility through a factoring organisation like Stenn International where the Seller pays the finance charges of goods exported internationally.

Factoring offers Sellers the means to offer open account payment terms to Buyers and immediate settlement of receivables upon shipment.  Stenn offers Sellers an LC product, where an LC is raised from Stenn to the supplier so the LC can be discounted through the local bank to receive immediate capital to fund raw material.

Read more how Stenn has helped retailers and manufacturers boost cashflow to achieve business growth success;

Case Study 1 – The Fast Growing Exporter

• FMC was a small China based flash memory manufacturer with an exciting new idea – they wanted to make plug in flash memory for Apple iPhones.
• FMC’s new product generated a lot of sales interest from new customers all around the globe - including from mega buyers in North America like Staples, Ingram Micro and Office Depot who wanted to place orders for their new product. 
• However, attracting premium buyers created it’s own problem for FMC, as dealing with big global buyers suddenly exposed FMC to the strength of the big buyers. Big buyers wanted to take FMC’s hot new products, but they wanted Open Account (O/A) terms with 90 days delay of payment. 
• FMC would have to dramatically increase production, manufacture much larger volumes than they had ever made before, ship those volumes overseas, and then wait 90 days to get paid. On one hand, the hot new product was a terrific sales success, but it created a significant problem that worried FMC’s management – how could FMC fund these 90 day O/A trade terms demanded by the buyers? FMC was used to paying its suppliers and workers as soon as goods shipped.  Was it even possible to expand to meet this new demand or would FMC have to say no to the biggest orders in the company’s history?
• FMC’s management team turned to Stenn to ask if Stenn could help.
• Stenn’s international trade finance team was able to put together a proposal for FMC that meant FMC would be paid for its new international orders, as soon as the goods were shipped – while the buyer wouldn’t have to pay Stenn for 90 days – as they wanted. This meant FMC could expand to meet the new growth opportunity, knowing that the payments terms demanded by the buyers would pose no problem for FMC’s cashflow. Workers and suppliers in China would still be paid on time, as soon as goods were shipped.
• FMC wanted to ensure that their important new relationships with their international buyers would not be damaged in any way, and it was the experience of Stenn’s team and their specialization in international cross border trade financing that made FMC comfortable to go ahead and begin co-operation with Stenn.
• Now, Stenn finances around a dozen of FMC’s buyers globally, and the FMC management team know that in future, they never need to worry about terms demanded by big new buyers again. FMC is free to do what they do best - to design and manufacture exciting new products, knowing that Stenn will take care of their financing needs.  
• Result: Great new global buyers and no cash flow problems.

Case Study 2 – The Fashion Retailer

• Fashion100 is a western clothing retailer with around 100 large retail outlets.
• Fashion100 had for years been working with around 200 Chinese suppliers with payment terms ranging from at shipment, to some suppliers offering 30 days payment terms.
• The Commercial Director at Fashion100 wanted to transform the company’s supply chain to shorten supply times and boost cashflow. The ideal outcome was to cut the number of suppliers to 50 and move those remaining suppliers onto Open Account (O/A) 75 day terms. 60-75 days was how long after shipping the average item sold, so 75 days delay enabled ideal cash flow matching. Cutting the number of suppliers to the better performing ones would be easy and would be welcomed as a reward by those better performing suppliers, but none of the suppliers would welcome being told they had to offer 75 days O/A terms. Most suppliers would just say “no – we cant do it”.
• Fashion100 spoke with several banks about offering solutions and realized that banks are not as interested in trade finance facilities as they were several years ago. Banks have not only been looking to significantly cut exposure to the traditional retail sector, but are much more interested in large commodity deals rather than the granular nature of consumer goods financing.
• Fashion100 was unsure if it would be possible to achieve their goal of moving suppliers onto O/A 75 days terms. If they could not do that, it would put a huge strain on cashflow.
• The Commercial Director at Fashion100 spoke with Stenn about how Stenn could help.
• Stenn worked together with Fashion100 to develop a solution and came to their annual suppliers conference to give a talk to all Fashion100’s suppliers about how Stenn and Fashion100 were working together to provide a supply chain environment whereby Fashion100 would receive the delayed payment terms they were after, while the suppliers would get paid immediately at shipment and with no credit risk of Fashion100.
• Stenn carefully took each Chinese supplier through 1 on 1 explanations to remove any fears about the new system and explained that Stenn would pay the suppliers immediately at shipment, eliminating any payment delays and eliminating any risk of the buyer.
• The end result was that by working together with the retailer, and by winning the trust of Fashion100’s suppliers, Stenn was able to deliver and execute a supply chain financing program that boosted the cash positions of both Fashion100 and their suppliers.
• Fashion100 had succeeded in rewarding its best suppliers with bigger contracts and immediate payment terms, while boosting their own payment terms and ensuring they themselves now had 75 days to pay their invoices. This meant Fashion100 could sell their goods before they even had to pay for them. 
• Result: Significantly boosted cash position and much better relationships with suppliers.

Case Study 3 – Order Finance

• China Manufacturer is a Shenzhen based white label electronics manufacturer, specializing in producing mobile devices for other brand names.
• China Manufacturer’s energetic boss, worked very hard trying to grow his business and he personally talked to buyers from many of the world’s big phone brands with the plan that one day, they would buy from him.
• ?      That day came in late 2016 when a huge global electronics brand, placed a trial order with the energetic boss for $5 mln worth of phones. It was the biggest order China Manufacturer ever had and it was the entry to the big league of buyers that the energetic boss had worked all his life for. He had a trial deal and he had to make the phones fast, with great quality and meet the terms of the buyer.
• Now the challenges started. In order to get the deal with the global buyer, China Manufacturer had agreed to 90 days payment terms. That was bad enough, but to make things worse, the energetic boss knew that he had to have the cash to buy the raw materials for the phones, glass screens, and other electronic components. All those specialized suppliers needed to be paid up front and China Manufacturer didn’t have enough free cash to buy those raw materials.
• China Manufacturer contacted Stenn.
• Stenn understood through the situation, and moved quickly to put together a solution.
• Stenn worked with both the huge global electronics brand and China Manufacturer to ensure all parties concerns were met. One of the complications was that global brand has a policy such that it can only pay into an account with the name of the seller. Stenn quickly resolved that potential problem by opening a collection account in the name of the China Manufacturer, that Stenn maintained control over.
• Stenn provided an L/C to China Manufacturer immediately for 35% of the value of the order ($1.75 mln), and China Manufacturer discounted that L/C in their Shenzhen bank, and used those funds to pay for the components. A month later, as soon as China Manufacturer shipped the completed order to their global buyer, the L/C paid out and Stenn paid the China Manufacturer for the remaining value of the invoice ($3.25 mln).
• The result is that by using Stenn to ensure the China Manufacturer had a) the money available to purchase the components up front b) was able to offer Acer the 90 days delayed payment terms they demanded and c) got paid immediately at shipment, The China Manufacturer was able to successfully produce and deliver the trial order of phones on time, and on quality.
• The China Manufacturer was rewarded with an ongoing suppliers contract with the global brand for $5 mln a month.
• China Manufacturer continues to use Stenn and is looking forward to expand his business even further in 2017.

Note: Company names have been changed to protect client privacy.

Factoring is available to all global businesses exporting commodities to developed markets, reach out to Phil Bailey via email [email protected] to receive an immediate benefit to your business.