The knock on effect of this uncertainty means that businesses will struggle to accurately forecast how much stock to hold or forecast their cash flow.In particular, businesses using just-in-time production methods, which are commonly used to increase efficiency and reduce the costs of holding stock, could see their production lines grind to a halt if their precisely timed deliveries are delayed. Likewise, those that are trading on fine margins could find their business model isn’t viable if the cost of goods increases due to new duties and tariffs. All of these factors could have a perilous effect on businesses across the country, but there are ways of preparing for these scenarios to limit the damage. For example, building stock reserves at current prices will allow accurate forecasting of margins into the future and instil confidence when filling customer orders. The challenge that comes with this is the need for strong cash flow, as businesses may struggle to find the reserve cash to invest in new stock without the help of a lender. Whilst there are many finance options available in the market, a trade finance facility is best suited for purchasing goods. This type of funding protects the interests of both the importer and exporter, as the buyer can have access to the goods immediately and the supplier is paid simultaneously, meaning the acquirer can fulfil orders and build stock reserves without dipping into its working capital.
Another option would be opening other supply lines to allow for dual sourcing of key components or products, which will combat delays and/or increased costs associated with EU suppliers.In this scenario, companies can pay up-front for goods with a trade finance facility in place, instead of requiring credit terms. This will no doubt make the negotiations easier and instil confidence in the supplier. Importing goods remains a priority to UK business; whether it’s because there are cost benefits associated with doing so or simply because products aren’t available in the UK. This won’t change after Brexit, so it’s important that supply lines are protected to ensure business continuity. Trade finance is one of the ways that businesses can do this, and it should be considered by companies that rely on overseas trade, but are concerned about what the future holds for their operations. Lucy Symes is regional business development manager at Scottish Pacific Business Finance.
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