Trade Finance for Growing Businesses: How Berkeley Supports the Fashion Sector

For growing businesses, securing a new order is only part of the challenge. The next question is often how to finance the stock, supplier payments and other costs required to fulfil it.

For Berkeley Trade Finance, the quality of the security lies in the quality of the order won by the client. This means that a company selling to established UK high street retailers can potentially use its confirmed orders and invoices as a key asset when seeking funding.

Why Growing Businesses Need Trade Finance

Many UK companies have opportunities to take on additional business but may be restricted by their available financial resources.

This can happen because of:

• Rapid business expansion
• Seasonal trading patterns
• Exceptional or one-off large orders
• Credit requirements imposed by final customers

Trade finance can provide a way for businesses to fund transactions from the supplier through to the final customer.

It can apply to both international and domestic transactions and can involve an intermediary company that purchases goods from a manufacturer and sells them to the end customer or retailer.

How Trade Finance Works

Trade finance can be structured in different ways depending on the transaction and the requirements of the business.

Traditional facilities may be based on credit analysis and balance sheet strength. Berkeley also uses alternative finance products for companies that may not have the balance sheet strength normally required by traditional lenders, including start-ups and growing businesses.

One approach is to transfer the risk towards the creditworthiness of the final buyer through selective factoring or invoice discounting.

These facilities can provide funding once goods have been delivered and sales invoices have been raised. When combined with purchase finance, funding can also be available earlier in the transaction, when the business needs to purchase goods from its suppliers.

Supporting the Supply Chain

Berkeley can also act as a guarantor, undertaking that a supplier will receive payment before goods are released.

Goods can then be held at a third-party warehouse, allowing the customer to inspect the products and confirm their quality before making payment and taking delivery.

This allows finance to support different stages of the supply chain rather than focusing only on the final sale.

Choosing a Trade Finance Provider

When selecting a trade finance provider, businesses should consider several important questions.

1. How flexible is the provider?

Can the facility be tailored as the business changes?

Berkeley describes itself as a specialist provider capable of financing the whole supply chain, with a range of products that can be adapted to different requirements.

2. How important will your business be to the provider?

The size of the facility and the provider’s knowledge of the relevant industry can affect the level of service and expertise available.

Berkeley states that it funds transactions from £25,000 to £2 million.

3. Will you have access to experienced decision makers?

Direct access to experienced decision makers can be important when transactions involve international trade or require a bespoke funding structure.

Berkeley’s clients have direct access to directors and shareholders Steven Pleace and Soheill Sarkoob.

4. How much funding is available?

Businesses should understand how a provider’s funding is structured and whether larger transactions require additional approval.

Berkeley states that it uses private funds rather than being dependent on restrictive banking criteria.

5. How is currency risk handled?

For businesses importing or exporting goods, foreign exchange can be an important consideration.

Berkeley has forex facilities with its bank and other independent providers.

6. What fees will apply?

Businesses should understand how fees are calculated and whether minimum or non-utilisation fees apply.

Berkeley states that its fees are transparent at the outset and that it rarely imposes annual or monthly minimum fees.

7. What are the contract terms?

The length of the agreement and any early termination charges should also be considered.

Berkeley states that facility contract lengths and termination fees are minimal, usually no more than three months.

Recent Facilities & Transactions

Berkeley has provided funding facilities across a range of sectors and transaction types.

£1.3 million | Ladies’ Footwear

Berkeley provided a combined invoice and purchase finance facility to a ladies’ footwear brand distributor.

The facility supported payments to a German-based brand owner manufacturing shoes in European and Chinese factories. The shoes were sold against purchase orders from major high street retailers in the UK and Europe.

£550,000 | Plant & Seed-Themed Gifts

A combined invoice and purchase finance facility was provided to a plant and seed-themed gift company.

Berkeley paid multiple suppliers for raw materials, which were assembled and packed at the company’s warehouse in the North-East of England. The finished goods were sold to a major US retailer and a UK supermarket.

£750,000 | Refurbished Mobile Phones

Berkeley provided a selective invoice finance facility for a refurbished mobile phone provider.

The facility funded more than £3.7 million of sales invoices to a single debtor over the previous 12 months.

£400,000 | Food & Drink

A combined invoice and purchase finance facility was provided to a start-up food and drink distributor importing products from suppliers across Asia and Eastern Europe.

The products were sold to customers in the UK and Northern Europe.

Case Study: Supporting a Growing Fashion Business

A young and growing UK fashion company had developed its own clothing brand and needed funding to purchase stock for retail customers across the UK, USA, Europe and the Middle East.

The company also needed stock for its growing e-commerce business.

The Challenge

The business needed to finance stock purchases while managing supplier payments, transportation and other costs associated with getting products to retailers and its online customers.

At the same time, the company wanted the flexibility to support larger orders and continue investing in its growth.

The Berkeley Solution

Berkeley provided a combination of:

• Selective factoring
• Supplier purchase finance
• E-commerce finance

The company’s largest customer was placed on the selective factoring facility, providing bad debt insurance cover.

Berkeley purchased goods from several European suppliers. Because the suppliers required payment before delivery, the facility supported the purchase of the goods before they were transported by truck to the company’s UK warehouse.

Once the goods arrived, they were divided between retailer deliveries and stock for the company’s online sales.

The facilities could also be used to fund freight, duty and VAT costs where required.

How Berkeley Was Repaid

Berkeley was repaid through the sales invoices raised on the customer’s retail customers and directly by the client as e-commerce stock was sold.

This structure allowed the finance to follow the movement of the goods through the supply chain and into sales.

Supporting Growth

The facilities also gave the company options to fund stock for its own retail operation and concessions within major high street stores.

With a financing mechanism in place, the company was able to consider larger orders and increase its PR and marketing activity.

It also gave the owners greater confidence when considering investment opportunities arising from the company’s growth.

Trade Finance for the Fashion Sector

For fast-growing suppliers to the fashion sector, one of the key challenges can be financing new and growing orders.

Young businesses may not yet have the long credit history or strong balance sheet that traditional lenders often require.

This can lead businesses to consider alternative forms of finance, including:

Trade finance, invoice finance and factoring.

Berkeley’s approach focuses on the quality of the confirmed purchase order or sales invoice as a key form of security.

For a fashion supplier, the purchase order from or sales invoice to an established retailer can therefore play an important role in the financing arrangement.

Experience Matters

Understanding the specific requirements of an industry is an important part of structuring trade finance.

Berkeley has a history of supporting clothing and fashion suppliers and states that it has particular experience in funding the garment and fashion sector.

For smaller suppliers looking to compete and grow, specialist trade finance can provide another route to funding alongside traditional forms of finance.

Key Takeaways

For growing fashion and retail businesses, trade finance can help address funding requirements at different stages of the supply chain.

Depending on the transaction, funding can support:

• Supplier payments
• Stock purchases
• Sales invoices
• E-commerce stock
• Freight
• Duty and VAT
• Larger customer orders

Berkeley’s approach combines these facilities according to the requirements of the transaction, with the quality of the underlying purchase order or sales invoice playing an important role in the funding structure.

Interested in discussing your funding requirements?

Talk to Berkeley Trade Finance →