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How to Leverage Credit to Grow Your Sourcing Business

#Financial Services
Zilingo Editorial Team
May 08, 2020
The evolution of global trade has exponentially reduced production cost for fashion manufacturers and increased the manufacturing speed significantly. The fast fashion industry is also expected to keep up with the latest trends and innovations where trends could change as frequently as every 3 weeks. Hence, one often has to heavily rely on effective sourcing strategies for a profitable business. The biggest challenge undoubtedly lies in identifying different financing options in order to grow one’s sourcing business.
Additionally, it takes a long time for companies to build brand recognition, break-even and have positive cash flows. Thus, bridging the existent working capital gap can be a notorious challenge for business owners. Credit is what enables them to have enough goods to sell, stimulate growth and scale the business. While different players stay afloat with recurring supply chain problems, many of them fall victim to the financing gap.
The major financial challenges faced by businesses in the fashion industry can be narrowed down to the following-
Inadequate Working Capital: Fashion is an intensive cash flow business where working capital plays a crucial role. Businesses need adequate capital to source raw material, pay wages, purchase inventory and maintain a balance until revenues flow in. However, due to increasing raw material costs and insufficient funds, the businesses struggle with scalability and end up just making ends meet frugally.
Delayed Payments & Long Credit Cycles: Garment manufacturers often don’t get their dues on time as the payment terms can generally vary across the supply chain from 15-180 days. Wholesalers or distributors of the products need to first sell the items in order to pay the manufacturers back. This process makes it difficult for emerging businesses to continue sourcing for newer orders. If they get credit in time, they can fulfil multiple orders simultaneously without waiting for payments to come in.
Little to No Credit Access: Financial institutions are also very cautious while lending to manufacturers or traders in the fashion industry due to lack of visibility into production cycles and unreliable cash flows. This ultimately leads to longer loan processing timelines and little or no access to traditional credit.
Zilingo Financial Services in collaboration with its lending partners helps bridge this gap through its innovative Buy Now, Pay Later and Advanced Payout product schemes and customized solutions.
Buy Now, Pay Later – Retailers, wholesalers or individuals looking to purchase raw materials or readymade garments can simply place an order on Zilingo Trade to Buy Now and Pay Later at their convenience. The buyer then receives the products and repays Zilingo Financial Services at a chosen date with a minimal processing fee. This facility allows buyers to enjoy extended credit periods on their purchases.
Advanced Payout - Designed for wholesalers, this product enables the sellers to get paid in advance against their future sales . As soon as the buyer places an order, Zilingo facilitates the transaction by paying the sellers upfront on behalf of the buyers. The buyer can pay Zilingo later on the standard payment terms discussed between the buyer with the seller.
These services can be accessed on all orders placed on Zilingo Trade, an online B2B marketplace designed for retailers, manufacturers, and brands. “Zilingo Financial Services have helped me expand my factory into a bigger and stronger brand, leading to a 200% YoY growth in revenue.” said Owner of Gladi Hom, a manufacturing business in Thailand. In addition, through our platform, businesses can experience hassle-free sourcing and buy a large variety of products at low prices from over 4000+ suppliers.
Zilingo aspires to enable many businesses across the fashion value chain to be more efficient and scale faster. So, if you’re a retailer, wholesaler or a small merchant looking to scale up your business, maybe it’s time you let Zilingo Financial Services bridge the gap for you!
Zilingo Editorial Team
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