Per last week’s announcement, the White House has raised existing tariffs on $200B worth of Chinese imports from 10% to 25% and is now threatening new tariffs of up to 25% on an additional $300B worth of Chinese imports as part of its ongoing trade war with China. The latest list targets a wide variety of goods, including apparel, accessories, food and beverage products, and livestock.
President Trump seems
optimistic about reaching an agreement with Chinese President Xi Jinping and downplays the conflict
as a “little squabble…because we’ve been treated very unfairly for many,
many decades.” The proposed changes will likely take effect in late
June or July unless a trade agreement can be reached before
then. Importers
should begin preparing to either pay the newly raised tariffs or
acquire their goods elsewhere.
Talk to our team
today to
learn how ETC can help you plan for the increased costs your business will incur due to the new tariffs and how to protect your
business during these uncertain times.
Due to delays in establishing a trade deal between the US and China, the President unofficially announced plans to raise the trade remedy tariff from 10% to 25% effective Friday. This will seemingly apply to all List III goods. The President also suggested a possible extension of the trade remedy tariffs to all imports from China.
Although an official notice has not been published yet, it is wise to prepare for the tariff increase as of May 10 if you import any included goods from China.
Innovation, in every sense of the word, has taken over. The combination of consistent technological advances and a global market in flux has changed the culture and functionality of business operations on a global scale. One of the most remarkable results of this has been a rise in creative financing methods designed to serve new business models or those that were previously difficult to fund.
Although some funding options are universally available to
those with strong credit (i.e. SBA loans for new small businesses), managing a
business’s debt and retaining maximum equity can be a tricky balance,
particularly if you have lackluster credit or no credit at all. Fortunately, financiers
are creating new services and creatively applying existing ones to accommodate
businesses that previously didn’t exist or had limited access to sustainable funding.
Here are a few of the most accessible and adaptable forms of financing
available.
Inventory Financing
If you sell seasonally specific or highly specialized
products, inventory
financing is a great way to maintain your working capital
without giving up equity or accruing excessive debt. For example, let’s say you
sell specialty liqueurs year-round, but approximately 70% of your sales occur
in the month leading up to Valentine’s Day. Even with healthy annual sales volumes,
this inconsistency can complicate year-round operations and strain your
resources.
With inventory financing services, your financier will
simply store your unsold inventory in a secure third-party warehouse, then
provide you with a loan or line of credit, using the stored inventory as
collateral. Since you won’t need those bottles until next January, you’ll have
plenty of time to supplement your operational funds, pay off the funding you
receive, and distribute the goods in time for Valentine’s Day. Businesses that
benefit most from inventory financing are wholesalers who sell non-perishable
consumer goods, as they needn’t worry about a lack of quality control if their
inventory spends weeks or months in storage before distribution.
Business Line of
Credit
Although aline of credit
isn’t exactly a new method of
financing, its versatility makes it worth mentioning in this context. Since a
massive proportion of new businesses don’t sell tangible goods, the lack of
readily available collateral can make it difficult for them to secure funding. Unsecured
lines of credit are specifically useful for this because, much like credit
cards, they don’t necessarily require traditional forms of collateral. Lines of
credit are also like credit cards in that if you consistently pay off your
balance, cash advances up to the full amount in your assigned credit line are
available to you at any time.
Equipment Financing
For businesses that sell perishable goods or don’t sell
goods at all, equipment financing is an attractive option. If your business
uses expensive appliances or computers, you may be eligible to receive a loan
or line of credit against your equipment, much the same way an individual would
against a car or real property. Provided that the value of your equipment is
equal to or greater than your business’s financial need, this is one of the
simplest options. Most businesses in the service industry can take advantage of
this, including some that are particularly difficult to finance like restaurants,
medical practices, laundromats, and factories.
Short or Medium-Term Loans
Short or medium-term loans from private lenders are a
somewhat expensive option, but they can be extremely useful if your business
needs cash immediately and can pay it back very quickly. These loans are
generally approved within a day and as a result, have higher interest rates
than a standard bank loan would. If you receive a large wholesale order for
which you expect to receive payment immediately, a short/medium-term loan can
provide you with the cash you need to produce and ship the goods and bridge the
financial gap that can occur when you have to pay to fulfill an order before
you receive any payment from your customer. There are a few ways to address
this problem, but if timeliness takes priority over cost, this kind of loan is
the best choice.
Purchase Order
Financing
If you’re dealing with the cost prohibitive nature of production, but don’t have particularly good credit, purchase order financing might be your best option. Purchase order financing (sometimes called “PO funding”) relies on the creditworthiness of your customers rather than that of your own business. You receive a cash advance against confirmed, open purchase orders to help pay for production of the orders in question. This kind of financing also allows significant flexibility and can combine with other financial arrangements like receivables financing. This means you can easily establish a seamless system that allows you to fulfill orders quickly and consistently without potentially draining your operational funds or accruing more debt than you can manage.
In short, funding options have never been more plentiful. If
your business needs a financial boost, there is likely a perfect solution to
your needs and limitations. Be sure to research your options and choose a reputable
lender who will walk you through its process and fees to ensure
that you get the best solution for your business and budget.
Members of the ETC team are attending this week’s trade shows in Las Vegas. Join us at any of the following shows to learn how we can help your business grow and thrive!
Business owners who rely on China’s abundant manufacturing facilities and low production costs may be in for a massive challenge. The ongoing trade war the US government has waged with China may not end by March, meaning more potential tariffs that could disrupt the global economy.
ETC’s own Mark Bienstock and other industry experts spoke to California Apparel News this week about strategies to protect yourself and your business from the effects of this ongoing international conflict.
Express Trade Capital is inviting wholesale businesses to apply for the first annual ETC Trade Show Grant & Community Outreach Award! This award reflects our personal commitment to helping our community and encourages our friends in the wholesale industry to join us in giving back.
Requirements to apply for the 2019 ETC Community Outreach Award are:
Application must come from an owner or authorized representative of the nominated wholesale business.
Nominated businesses must sell consumer goods to retailers in the US with a minimum annual sales volume of $100,000 USD.
Applicants must demonstrate their business’s commitment to the community at large, whether through charitable giving, volunteer work, or other creative methods.
All applications must be submitted by February 28th, 2019.
We will announce a winner on March 1st, 2019. The winner will receive $3,000 USD toward a booth at a trade show of their choice.
ETC is proud to announce the latest addition to our arsenal of services: co-packer work in progress purchase order financing for the food and beverage industries!
Contact us today to learn about this dynamic new financing tool, which will supplement your production costs and allow your business to reach new heights!
A back-to-back letter of credit (LC) is a common, but often overlooked, form of trade financing.
In a typical back-to-back LC scenario, an intermediary trading company receives an inbound LC from the buyer’s (applicant’s) bank and, using that first LC as collateral, issues a second, outbound LC in favor of the supplier (beneficiary).
Back-to-back LCs are surprisingly simple to coordinate, as both LCs are nearly identical. The only differences between the two LCs in a back-to-back LC model are the credit amount vs. the unit price and the expiry date/period for presentation/latest shipment dates. The unit price is how much the product will cost the final customer, whereas the credit amount accounts for the wholesale costs. The timing of the two LCs must be staggered to allow time for each party to process and transport the shipment.
The additional layer of security that back-to-back LCs provide comes not only from the presence of two separate, albeit nearly identical LCs, but also from the fact that both LCs are available at the intermediary’s bank. This centralized method of monitoring reduces risk and secures all parties involved in the multi-tiered transaction at hand.
Back-to-back LCs therefore help build trust between buyers and sellers of goods around the world, reduce credit risk, and speed up cash flow. They’re beneficial to the intermediary trading company insofar as the company does not need to disclose to its supplier the details of the ultimate buyer of the goods or even the price at which they were sold.
Big brands, particularly food brands, have been merging with and acquiring smaller brands for decades. In recent years, food and drink executives have continued to strategically acquire small brands, but struggle to boost productivity among those acquisitions without damaging or cancelling out any of the fundamental qualities that made the small brands worth buying.
This struggle to maintain the appeal of a small brand while operating under a massive international conglomerate like Coca Cola or Hershey has become increasingly challenging as consumer priorities evolve. When a big brand acquires a smaller one, consumers tend to be concerned, at least initially, about the product remaining consistent. Over time, however, other issues often arise. A strong company culture and drive to innovate, both of which are often crucial to a small brand’s success, can get lost when a big brand takes over.
A prime example is the trajectory of natural food brand Kashi since it was acquired by Kellogg Co. in 2000. Prior to the acquisition, Kashi was one of the first brands to usher in the now-lucrative and popular industry of healthy foods made from simple, ethically sourced ingredients. Though the partnership worked for a while, Kellogg’s impulse to control Kashi’s internal operations eventually took hold, which hindered Kashi’s ability to constantly innovate and improve its products. Before the acquisition, teams of three or four people made decisions about everything from suppliers to pricing to new product development. In an attempt to take more decisive control, Kellogg’s convoluted Kashi’s processes, slowing down their decision-making capability and complicating attempts to change or grow.
To be clear, no one is saying that big brands shouldn’t acquire smaller ones. There is immense potential value in giving young, fresh businesses the resources that big brands have. However, when acquiring a young company that’s found a niche and an audience, one should be aware of what makes the small brand appealing to consumers and make every effort to maintain and support those qualities, while still facilitating increased production and global reach.
Some of Walmart’s recent acquisitions, notably Bonobos, are perfect examples of this. When Walmart initially acquired Bonobos, there was considerable public backlash. Fans of the online men’s wear brand were concerned that quality would plummet in favor of lower prices when Walmart took over. Walmart wisely remained “hands-off”, allowing Bonobos to uphold its central values as a company: high quality, a good fit, and inclusive sizing. As a result, Walmart indicates that its online sales have increased substantially since it acquired Bonobos among other ecommerce brands last year.
Needless to say, it’s a tough balance to strike, but since changing a formula that works for a small brand is a bad idea, it’s obviously important for big brands to rigorously research whatever businesses they plan to acquire. It’s also important to keep key team members from the smaller business involved and give them input on how the business moves forward after the acquisition, rather than commandeer operations entirely. Simply creating an open line of communication can do wonders to not only maintain the acquired brand’s growth and success, but also to establish a positive working relationship between new management and the people who made the business successful in the first place.
