How Fintech Partnerships are helping independent wholesalers innovate Trade Credit

By Zoe Newman, Head of Partnerships at Capital on Tap 

Managing cashflow is a challenge for both wholesalers and their SME customers, both facing difficulties collecting payments from their customers and often reliant on good trading periods to be able to pay for stock and other business expenses.

These challenges have been widely overlooked to date and businesses have been left to cope with these cashflow difficulties themselves, with minimal support made available from banks or other financial services.

Fintech enterprises have begun to recognise the need for a solution here and have developed new products and partnerships which offer wholesalers access to an innovative and automated trade credit solution. These initiatives are enabling wholesalers to better support their customers by giving them access to instant credit with which to fund business purchases.

For many independent retailers, short-term cash flow issues are a familiar experience which will have had a significant impact on their business and impeded their ability to buy goods. Typically for independent retailers or restaurants, this experience often involves a cycle of not being paid by clients and customers and, as such, not being able to afford to purchase goods from wholesalers. Often, when looking for an alternative solution, many will turn to short-term loans, the majority of which have high-interest rates which make them unsustainable economic solutions, with the perils outweighing any perceived benefits. Needless to say, this cycle is detrimental not only to these retailers but also to the independent wholesalers who are reliant on them for business.

However, the new partnerships between fintechs and wholesalers are providing a much-needed solution to this problem and offering SMEs access to trade credit for business purchases without the strings of many short-term alternatives. These partnerships are enabling wholesalers to provide a much-needed solution to the short-term cash-flow problems faced by their customers. It allows them to use the credit for any business purchases, giving them a sense of security if they should come into any unforeseen costs and not restricting them to only spending with the wholesale partner.

For independent wholesaler JJ Foodservice, a new partnership with fintech finance specialist Capital on Tap has enabled them to offer their customers additional credit, allowing them to offer a new element to their customer relationships. In this case, JJ Foodservice has supported their customers by providing access to instant credit of up to £50,000 and in total has provided over £4.5million in trade credit to their customers. In doing so, JJ Foodservice has helped SMEs access funding which will allow them to grow their organisation and take advantage of business opportunities, while also encouraging more sales with the wholesaler. The Mastercard-backed funding also offers up to 56 days interest-free credit and cashback on spending, both of which are a far cry from many bank-issued credit cards or short-term loans. Not only does this give JJ Foodservices’ customers more freedom and flexibility, but it also removes some of the costs and burdens associated with the high-interest short-term loans that many will have had to resort to previously.

While the benefits to the customer are clear, JJ Foodservice is also set to benefit from their partnership with Capital on Tap due to it increasing their customers’ spending potential with them. Additionally, thanks to the branded nature of the cards issued, customers are reminded of the wholesaler every time they take out their wallet or use the card. This extra exposure is a valuable by-product for JJ Foodservice.

The partnerships between fintechs and independent wholesalers are enabling these businesses to inspire increased customer-loyalty and customer satisfaction by recognising a need in their customers and providing a viable solution. The initiative also means that these businesses are no longer just wholesalers, but they are also service providers – adding a new string to their bow.