The retail chain typically pays for the kitchen roll 90 days after the rolls are delivered. However, the reprocessor is obliged to pay the distributor for the raw material at the point of dispatch from its warehouse. This 90 days’ working capital requirement of the reprocessor, who has a growing order book, has put huge strain on the reprocessor’s finances. Although its factory has the capacity to meet growing demand, it has been held back by a lack of sufficient working capital. 

With turnover increasing rapidly, the client found that its core supplier group was struggling with cash flow and working capital challenges due to increased product demand. The suppliers’ circumstances meant that traditional methods of bank funding were not available to meet the shortfall. 

The client is in the business of importing apparel manufactured in Malaysia and Indonesia. It supplies both the retail and online trade markets in the USA, and has built its market share by being able to respond quickly to varying customer demand in both volume and design. 

The Chinese manufacturer requires partial payment prior to the start of the manufacturing process and full payment before releasing the finished products from its factories in China. Previously, the client funded its partial payments in cash and the remainder using documentary credits to resolve the funding gap in its supply chain.