Managing Big deal risks

 Big Deal? - No problem, work with options.

One of the fascinations of this channel is the ability of the small business to compete with much bigger players and come out winning. The ability is clearly there and the end user has the conviction and trust in the smaller business. Surprisingly, price may not be the primary driver and the relationship and previous knowledge coupled with the special personal attention given by the smaller business wins the day.

What throws a spanner in the works is the ability of the small business to finance credit required to complete the transaction and this is frequently where many trip over; much is down to misplaced pride and inflexibility in considering the risk being asked of the supplier, (irrespective of the risk quality of the end user) and let’s be frank, Supplier risk is with the Reseller. 

Everyone likes to see revenue through their books and this is understandable but with no ability to obtain the level of credit to manage big deals, smaller Resellers simply must show understanding of risk and be willing to consider working with Suppliers to close the deal fully.

Debt assignment of those special one-off large deals is not like having a tooth pulled out without anaesthetic. It’s no different a process to going to a bank to ask for an overdraft or an invoice discounter or factor to finance accounts receivable. If a business is willing to grant a legal charge in these circumstances, what on earth is the problem is granting a Supplier the same privilege; indeed in the case of a Supplier, the charge is limited in terms of receivable debt and time period to simply that one specified debt, they are in other words satisfied once the end user pays and no longer apply.

There are occasions where prior Charge holders have to be notified and where waivers must be obtained in order to secure such one off debt assignments but quite why there should be a stigma attached to this in the mind of the Reseller is questionable. The supplier does all the work; Should Charges be evident, they obtain prior waivers directly, prepare and file the relevant charge documents and pay the Companies House fee applicable. They are even willing to assist in showing the Charge satisfied when the deal is done.

If there is a requirement for the Reseller invoice to carry an endorsement to the effect the debt and invoice is assigned to a chosen supplier (and this is not always the case), and that payment is to be made to a nominated bank account, it is no different to the requirement insisted upon by Factors and Invoice discounters.

Distributors provide enormous amounts of finance credit, far in excess of anything banks and other financial institutions release and it must be understood that occasionally, where the situation demands it, an equal measure of security is required, albeit much shorter term.

It’s a great way to finance big deals when there is no other finance option available and can actually help to increase the value and amount of open credit a supplier can provide once such deals have been done, without security. It also establishes a working relationship and practice that can be repeated at any time in the future, giving small businesses the comfort of knowing they can do these deals and their clients, the knowledge they can trust the Reseller to deliver.