Invoice financing offers easy solution to RMG working capital

Singapore-based startup Incomlend has announced a new invoice financing programme for Fashion Tex Asia Ltd, an apparel buying house, and garment exporter Sadat Apparels Ltd. 

The working capital solution will allow the two companies, based in Dhaka, to increase their production targets for customers in the United States, Europe and South America. 

In a press release issued on Thursday, Incomlend said that typically, it took Fashion Tex and Sadat Apparels up to 120 days to get cash against an invoice. The extended credit terms can potentially impair cash flow and impede their ability to boost their manufacturing outputs and source merchandise to meet rising demands.

The quick turnaround facility provided by Incomlend will enable Sadat Apparels Ltd and Fashion Tex Asia Ltd to receive cash as early as three days after goods are shipped to a buyer. So, the companies will have the working capital to cover their operational expenses and work on new orders. 

The invoice financing programme also offers the two Bangladeshi companies financial agility to pursue new growth opportunities as the appetite for garments from here continues to soar globally. 
In the statement, Rezaul Karim Jahid, managing director of Fashion Tex Asia Ltd and Sadat Apparels Ltd, said, "With Incomlend Invoice Financing Programme, we can concurrently retain our customers by offering competitive payment terms and free up our working capital. We now have access to a steady cash flow to pump back into the production cycle and increase turnover and profit, contributing significantly to our business growth. We look forward to working with Incomlend for the long-term."

Incomlend CEO and Co-founder Morgan Terigi said, "Bangladesh is home to many apparel manufacturing SMEs and is an emerging export powerhouse in South Asia. As a company with a proven experience in the garment industry, Incomlend strongly supports these SMEs in capitalising on positive market conditions with our quick turnaround financing facility. We are enabling manufacturers like Sadat Apparels Ltd and buying houses like Fashion Tex Asia Ltd to scale their business and expand their footprint overseas by providing them with competitive and alternative non-recourse working capital solutions." 

Invoice financing enhances availability of working capital for 100% export-oriented companies. Generally, a payment in export business involves four parties- importer, exporter, importer's bank and exporter's bank.

Talking with The Business Standard, Shovon Islam, managing director of Sparrow Group of Industries, said, "as a supplier of Marks & Spencer we have such an arrangement with a buyer-nominated invoice financing company, a very easy way to get payments after submitting bills." 

He said if he chose the option of discounting (invoice financing), only 2% of the total bill would be deducted as the charge for instant payment, whereas M&S generally paid its suppliers within 60 days.  

Shovon also said that almost every large brand and buyer had such arrangements to ensure that their suppliers had working capital to continue production. 

Another apparel exporter Classic Group has experience working with two invoice financing companies. It's Chairman and BGMEA Vice President Shahidullah Azim said small factories had no access to invoice financing by multinational companies. 

Echoing the comment of Azim, Fatullah Apparels CEO Fazlee Shamim Ehsan said invoice financing was a good solution to meet the need for working capital at a minimum discount or commission, but an exporter would not be able to enjoy it unless its annual business with a single buyer exceeded $1 million. 

"It's a system to secure exporters' investments. As an intermediary company, the service provider pays to suppliers on behalf of the importer after getting an invoice."