Flexport Capital recently released a financing solution to help alleviate the working capital constraints caused by the U.S.-China tariffs.
According to the company, a suite of trade finance solutions, Flexport Capital helps businesses – especially “fast-growing companies” – keep their capital working for them.
Dan Glazer, Flexport Capital’s vice president, said in an interview that small-to- medium-sized enterprises are being served by this new offering.
“It’s mostly in the apparel and high-tech electronics sector,” he says. “But we were surprised that even a few industrial manufacturers are attracted to this service.”
These two compounding factors mean that many of our clients, and probably many U.S. companies, are experiencing a cash crunch. In these situations, working capital – the day-to-day cash that companies need to reinvest into their businesses, pay suppliers and develop new products — is trapped in the supply chain instead of flowing through a business. Less working capital means fewer opportunities to invest in the business, which could result in stagnated growth. For instance, customers can use financing to fund additional inventory or new manufacturing facilities to offset pressure from the delicate supply and demand equation.
To beat the January 1, 2019 tariff deadline, many US brands imported large volumes of inventory. According to the WSJ, inventory stockpiling led to $3.4 trillion in working capital getting locked up across U.S. companies at the end of 2018, up from $2.7 trillion five years ago.
And brands that can’t afford any of these tariff mitigation measures are stuck funneling massive amounts of cash to cover higher duty payments. According to Reuters, as tariffs have increased, companies have had no choice but to put down larger deposits on U.S. customs bonds, a guarantee to the U.S. government that a company will pay the bill for tariffs.