3 questions to smart minds

Finetrading creates liquidity

For this 3 questions to Clemens Wagner

WCF Fine­tra­ding Ltd.
Photo: Clemens Wagner
16. March 2016

Fine­tra­ding has incre­asingly estab­lished itself along­side leasing and facto­ring as a third alter­na­tive instru­ment for releasing liqui­dity for SMEs in addi­tion to bank financing. 

For this 3 ques­ti­ons to Direc­tor Consul­ting, WCF Fine­tra­ding GmbH

1. Is fine­tra­ding still the right solu­tion in times when compa­nies gene­rally find it rela­tively easy to obtain credit?

Defi­ni­tely yes! In prin­ci­ple, the days of rest­ric­tive lending in Germany are over, and compa­nies with strong credit ratings in parti­cu­lar are curr­ently gene­rally able to obtain loans without any problems. Nevert­hel­ess, many SMEs are forced to broa­den their finan­cing due to rating requi­re­ments. These compa­nies have become highly profes­sio­na­li­zed in recent years and have reco­gni­zed the value of diver­si­fied finan­cing. In this context, they appre­ciate the contri­bu­tion of alter­na­tive sources of liqui­dity such as fine­tra­ding, espe­ci­ally since we are very close to our custo­mers’ requi­re­ments and offer them tail­o­red solu­ti­ons. For exam­ple, fine­tra­ding is incre­asingly being used to outsource inventory.

2. Fine­tra­ding in the warehouse busi­ness, how does that go together?

In contrast to clas­sic fine­tra­ding for the purchase of goods, “fine­tra­ding for consign­ment warehou­ses” enables suppli­ers to convert their deli­veries to a consign­ment warehouse into imme­diate liqui­dity and thus opti­mize their working capi­tal. Corpo­ra­ti­ons in parti­cu­lar expect their suppli­ers to main­tain 100 percent stock levels so that they can meet their deli­very obli­ga­ti­ons at all times. At a time when the Schen­gen Agree­ment, and with it the relia­bi­lity of supply chains, is being called into ques­tion, the issue of supply secu­rity natu­rally takes on an addi­tio­nal explo­sive nature. With our offer we provide a market-driven solu­tion for these chal­lenges with a possi­ble balance sheet effect.

3. What can such a balance sheet effect look like through finetrading?

The best way to explain this is with a concrete exam­ple. A company in the agri­cul­tu­ral sector is offe­red seed at favorable condi­ti­ons in winter because it is out of season. Since plan­ting will not take place until next spring, must be stored. Through the inter­po­si­tion of WCF, the seed supplier bene­fits, because the latter redu­ces its stock on the suppo­sed balance sheet date of 12/31. Another posi­tive aspect for the custo­mer is the imme­diate payment of the invoice by the fine­trader in the old balance sheet year, i.e. the custo­mer enters the new year with no outstan­ding receivables.
The agri­cul­tu­ral company even bene­fits twice: By invol­ving WCF, the company streng­thens its nego­tia­ting posi­tion, because the argu­ment of accep­tance and payment of the supplier in the old balance year by the Fine­trader enables discounts and winter reba­tes. With the WCF storage solu­tion, the orde­red seed is then deli­vered to a WCF consign­ment warehouse (typi­cally in close proxi­mity to the customer’s actual warehouse or directly on the customer’s premi­ses) where it remains untouched. Only when the seeds are sown — and our custo­mer from the agri­cul­tu­ral sector is also flexi­ble in this respect and can depend on the weather — is the product remo­ved from the warehouse and the Fine­trader issues the invoice when it is remo­ved. The agri­cul­tu­ral company thus secu­red the favorable condi­ti­ons in the old finan­cial year, yet did not build up any addi­tio­nal inven­tory and gave itself more finan­cial leeway thanks to the option of the long payment term. This is a win-win situa­tion for both the supplier and the custo­mer. Howe­ver, compa­nies must note that the final assess­ment in this regard is always made by the respec­tive auditor.

About WCF Fine­tra­ding GmbH

WCF Fine­tra­ding is Germany’s first fine­tra­ding service provi­der. Since 2003, WCF Fine­tra­ding has been offe­ring bank-inde­pen­dent solu­ti­ons for the opti­miza­tion of working capi­tal to medium-sized compa­nies. More than 2,000 compa­nies — across all indus­tries and size cate­go­ries — use Fine­tra­ding to date. “We ensure that medium-sized compa­nies remain liquid both during purcha­sing peaks and growth phases. Whether it’s purcha­sing goods, storing goods or project busi­ness — thanks to fine­tra­ding, our custo­mers can access the previously often unused cash discount.”
The total of WCF-appro­ved purchase lines is curr­ently in the hundreds of milli­ons of dollars. Its clientele includes medium-sized compa­nies from all sectors with sales of between one million and six billion euros. The annual purcha­sing volu­mes of these compa­nies range from 250,000 euros to 25 million euros.

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