This month, UPS subsidiary UPS Capital, which offers products including credit lines, cargo insurance and collections services, expanded its financing options aimed at small and mid-sized companies. The new financial products will facilitate global trade by allowing US-based importers to borrow up to 100% against a supplier’s commercial invoice.
Maintaining cash flow is a major hurdle for small businesses. UPS Capital cited a study from US Bank which noted that 82% of business failures are due to poor cash flow. Small importers face the added complication that most banks will not offer credit lines on inventory that is in-transit, which leaves an importer’s capital tied up during the transit process, lowering the business’ liquidity.
Some of the expanded offerings aimed at increasing liquidity for small importers include:
- The option to borrow up to 100% of the supplier’s commercial invoice, up from the earlier 70% threshold.
- Unsecured credit lines from US$300,000 to $1.5 million.
- Better rates for eligible companies that ship with UPS.
- Loan repayment terms of 90 days, up from the earlier 75 days.
In practice, this means that UPS Capital can disburse funds to an importer as soon as it receives a confirmed supplier invoice, and once the shipment leaves its origin point. Importers can then immediately use the funds to buy more inventory, pay its suppliers or invest in its own operations. Although importers are not required to ship with UPS, lower rates are available for those who do; likely because UPS’ control of the entire end-to-end supply-chain enables it to nearly guarantee the delivery of goods in transit with its affiliate delivery arms.
The main selling point of the new line of offerings is the increased flexibility that allows businesses to be more creative with how they access cash, according to UPS Capital president Mark Robinson.
“If I have to prepay a supplier before I have a chance to sell the goods, I risk running into a cash flow problem,” Robinson explained. “Now you can order more supplies, do more business without hesitation while goods are in motion.”