In this blog, we discuss these two forms of business lending so that you can decide which one suits you and your business best.

What is supplier credit?

Supplier credit means that you 'borrow' money from one of your suppliers for a short period of time. For example, you buy products in April but pay only in June. This form of financing can help you when you have to buy a lot of inventory in a short period of time. This way, you can switch quickly when necessary. Very handy with the unpredictability of the corona relaxations.

An example: you buy the new summer collection of clothing from your supplier for €5,000. Thanks to the supplier credit, you can delay payment for a while. Sometimes suppliers charge a small interest fee for this. Always check the terms and conditions of your supplier (s) carefully.

However, it is difficult to get supplier credit these days. And if you already know how to make an agreement about it, the crisis will leave you with conditions that have become a lot more unattractive. Suppliers are afraid to take less risks and are afraid that the amount will not come back in these uncertain times. That's why we often see them raising their interest rates or working with installments, for example.

Benefits of supplier credit

• Your readily available money won't get in trouble: because you don't have to pay immediately, you are less tight on money, which you can use immediately (that's what we call liquidity).
• No equity required: in the event that you sell faster than you have to (repay), no equity is required.
• Flexibility: unlike, for example, the bank, the “credit” will be greater the more you order from your supplier. Another great example is that it can change with your turnover (20% in advance, 20% upon delivery, 60% afterwards).

Disadvantages of supplier credit?

• Stricter conditions: due to the ongoing crisis, many suppliers are forced to tighten their conditions. For example, higher interest rates are charged.
• Dependency: if you let a supplier finance a large part of it, the dependence can become too great. This causes a problem when the supplier withdraws the credit.
• Sales that may disappoint: do you have a shorter period? Then there is also less money to pay back. This creates a shortage in your liquidity.

What is direct lending?

Direct lending is a form of financing where money is provided directly to entrepreneurs, without bank intervention. You often need a lot less paperwork and the money can be in your account within a few days. Want to know more about direct lending? Then read this blog.

Benefits of direct lending

• quickness: with an alternative party, you can often have the desired amount in your account within a few days.
• No red tape: you don't have to provide a complete papershop, a few checks are sufficient.
• More options: more customization is often needed and we think along with your situation.
• Pin curing possible: Using a fixed percentage of your debit card turnover to repay is an easy way to pay back.
• Customer-friendly: where banks often have a civil servant culture, you are not a number with alternative parties.

Disadvantages of direct lending?

• Interest rate: the interest rate may be slightly higher than at the bank, but this depends on your risk profile.

What is the right choice for your situation?

Due to the corona crisis, we notice that the traditional forms of finance are drying up. Banks are saying no and suppliers are forced to tighten the brakes by changing their terms and conditions. The belt is tightened everywhere, but you want to keep going.

So we see many entrepreneurs coming up with the opportunities that direct lending offers. This allows you to respond smartly to your situation, such as by achieving a purchasing advantage by purchasing in bulk or pre-financing projects. The possibilities are endless.

Swishfund is an example of such a direct lender. We offer entrepreneurs an attractive alternative to short and medium term corporate financing.

Do you want business lending? Discover immediately what your financial options are and make a request!

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