As a business owner, you want to sell as much of your goods or services as possible – preferably on a cash basis. But what if a customer doesn’t have the cash on hand, but wants to buy from you? It might be beneficial in the long run to offer them trade credit. This is a financial agreement that lets a customer purchase goods without paying upfront, but rather paying you at a later, agreed-upon date.

The benefit of offering trade credit is you’re making a sale and increasing the likelihood of that customer buying from you again. The downside is that you’re temporarily without the funds from that sale and there’s always the possibility of a late payment or nonpayment.

Fortunately, UnLock’s trade credit solution helps your business customers gain access to extend their trade credit terms while you as the business supplier are paid on time, in full. UnLock acts like a trade credit account for every UnLock customer, so they can buy more from you.

Keep reading to learn more about the benefits of trade credit, UnLock’s trade credit solutions, how trade credit is different from trade finance and more.

Benefits of trade credit finance

Although trade finance and trade credit can be beneficial to your small business, you are likely to be dealing with the latter more frequently. That’s because trade finance is used more so for shipping goods, while trade credit can be applied to more frequent purchases made with a domestic business.

The availability of trade credit makes it an easy choice for SMEs because it eliminates the need to have money on hand. Additionally, a trade credit deal, especially with a solution like UnLock, will be more flexible and have friendlier repayment terms than a loan with traditional financial institutions would.

There are a few reasons why SMEs should consider using UnLock as an alternative trade credit solution. When busy using UnLock, SMEs can enjoy:

  • Enhanced cash flow: Businesses can still make vital purchases as they anticipate an inflow of funds.
  • Flexible repayment terms: SMEs have a choice of repayment terms.
  • Trade terms with a huge range of suppliers: SMEs can use the UnLock Mastercard to buy from anywhere that accepts Mastercard or upload invoices from any supplier. It’s like having a trade account with everyone.
  • Payment flexibility: SMEs can pay for invoices and make business purchases online and instore.

Suppliers can also benefit from trade credit services, however, there are disadvantages for the supplier. If an SME buys a product on credit, the supplier’s cash flow is disrupted while they wait for that payment.

The UnLock product eliminates your worry as a supplier of unpaid invoices.

If your customer has an UnLock account, once they give your invoice to us, we’ll pay you on or before the invoice due date. You always get paid on your terms and you’ll never have to change a valid, unpaid invoice that has passed its due date.

The process is simple. You get paid on your terms, while your customer pays on theirs.

UnLock Trade Credit

When you work with UnLock, you don’t need to have money on hand to make business-related purchases. We pay your supplier’s invoices on the due date, so you can keep your business going and repay us at an agreed upon time.

  1. First, you purchase something with your UnLock Mastercard (up to $19,999 with your personalised limit), or by accepting an invoice from your supplier and putting it on the UnLock Customer portal (the invoice can be any amount up to your personalised limit).
  2. Then, UnLock pays your invoices for you – on time, every time. We’ll pay your suppliers for your UnLock Mastercard purchase the same day and invoices on their due date or earlier, per your direction.
  3. For easier accounting reconciliation, we’ll group all of your UnLock Mastercard purchases for the month into a single direct debit. You choose if you want 30- or 60-day payment terms at the end of the month from the month when the transaction was made. For supplier invoices, you can repay us 30, 60 or 90 days from when we funded the invoice.
  4. For even more convenience, you only pay UnLock rather than a group of different suppliers.

Meanwhile, the UnLock Mastercard works just like any other card. You can use it to purchase business-related items wherever Mastercard is accepted. Then you repay UnLock based on your payment terms, either 30 or 60 days after the transaction.

Here are a few additional benefits of using UnLock as a trade credit account:

  • Large range of suppliers: If a supplier accepts Mastercard, you can purchase from them. It’s like having a trade account with everyone.
  • Payment flexibility: You can make purchases online and instore as well as pay invoices.
  • Purchasing power: You can use your UnLock Mastercard to make purchases between $1.99 and $19,999, within your personalised account limit.
  • Personalised buying limit: Your UnLock account is tailored to your business’ financial needs. Pay invoices for any amount up to your UnLock account limit.

You can begin making business purchases with UnLock within 48 hours if you have:

  • An active ACN or ABN
  • Been in business and have registered for GST for at least 12 months
  • No judgment defaults

How are trade credit and trade finance different?

The terms “trade credit” and “trade finance” are close enough that they can be used interchangeably or even compared to one another. The fact is they are not opposites – trade credit is just a form of trade finance.

Trade credit is what UnLock offers as an alternative solution; the opportunity for customers to purchase goods despite not having cash on hand. Instead, UnLock pays the supplier for the products or services and the business repays UnLock on their chosen extended payment term.

Trade finance meanwhile is a catch-all term that encompasses a variety of financial products, instruments and services, including trade credit. Firms use it to contact international trade and facilitate commerce.

Trade finance also makes it easier for companies to make business deals via trade.

Small businesses can use trade finance to import or export products. The practice bridges the financial gap between exporters and importers by bringing in a third party. The additional party helps decrease risk and makes trading easier. Banks, insurance firms and trade finance companies are among the parties typically involved with trade finance services.

If there was a similarity between trade finance and trade credit, however, it would be that they’re both instrumental in improving a business’ cash flow. With trade finance, the buyer’s bank (the aforementioned third party) guarantees payment, providing peace of mind and minimising payment and shipping delays. Both parties can keep their business operations going, have a better idea about their cash flow without taking on much risk.

At UnLock, we take the hassle out of trade finance. We pay your suppliers on their terms and you repay us on yours.

At UnLock, we understand how frustrating it can be as a buyer to deal with credit terms that don’t fit your needs or as a supplier having to manage numerous trade credit accounts and deal with debt collection. That’s why we offer an alternative trade credit solution that gives both parties an easy and efficient way to improve their cash flow by providing flexibility and extended payment terms. UnLock makes buying and selling easier for everyone: buyers get flexibility and extended payment terms, suppliers get paid on time.

Enquire now to learn about how UnLock can help your business increase its working capital and improve its cash flow.