Import finance in Ireland: stock and trade finance for importers

Most importers fund the whole supply chain themselves. A typical order from outside the EU might involve a deposit when you place it, the balance before shipment, then freight, customs duty and import VAT. The goods may spend weeks at sea and more weeks in your warehouse. When you finally sell them, your trade customers may take 30 to 60 days to pay.

Add those stages together and your money can be tied up for four to six months on every order. This is your cash conversion cycle. The faster you grow, the more cash the cycle needs, so a profitable importer can still struggle to fund a bigger order.

Importer cash flow: a typical timeline

1. Order placed: supplier deposit paid.
2. Goods ready: balance paid, often before the goods leave the port.
3. Shipping: freight paid.
4. Arrival in Ireland: customs duty and import VAT due unless deferred or postponed.
5. Warehouse: stock waits to be sold.
6. Sale: you invoice the customer and wait for payment.

Finance costs money, so start with the free options Revenue already offers. Your customs agent or accountant can confirm which apply to your company.

Postponed accounting for import VAT

Postponed accounting lets you account for import VAT on your VAT3 return instead of paying it when the goods arrive. Revenue says it is available to all traders registered for VAT and for Customs and Excise, and that it may be used on all imports from third countries, including Great Britain (excluding Northern Ireland). It is optional.

In the same VAT3 return you can usually reclaim that import VAT, subject to the normal deductibility rules, so for a fully taxable business the cash effect is often neutral. You report the customs value of the goods plus customs duty in box PA1. To stay entitled, your company must comply with its tax and customs obligations and keep proper records. Revenue can exclude a trader from postponed accounting by serving a Notice of Exclusion.

Customs registration and deferred payment

Postponed accounting covers VAT, not customs duty. To import from outside the EU, your company must register for Customs, usually by getting an EORI number. Revenue then assigns a Trader Account Number (TAN), which is used for payments such as import duties. Revenue also explains that a deferred payment authorisation lets you import goods in one month and pay the import charges by the 15th of the following month. That can give you several extra weeks on duty.

Other ways to ease the gap

• Ask your supplier for better terms, such as a smaller deposit or payment some days after shipment, once you have a track record with them.
• Look at your own credit terms to customers. Chasing late payers and charging late payment interest where you are entitled to it can free up cash.
• Review slow-moving stock. Money tied up in lines that do not sell is money you may end up borrowing.

Stock finance, also called inventory finance, gives your company funds to buy stock, with repayment due once the goods have been sold. Some providers lend against stock you already hold. Others fund each purchase invoice as it comes in. The lender looks at how quickly your stock sells, your margins and your trading historyHow long a company has been actively trading, and the record of that trading shown in its filed accounts, bank statements and tax returns..

Trade finance is a broad term. For a small or medium importer, the most practical form is often supplier-payment finance. The lender pays your supplier’s invoice now, which may help you secure an early-payment discount or a larger order, and your company repays the lender over an agreed period.

Two lenders on our panel offer this type of product, and their published terms show how it works in practice:

• Treyd says that, once your company has a limit, you upload a supplier invoice, choose a payback period of one to five months and repay the funded amount plus Treyd’s fee. Its Irish site says applicants need at least one year of trading, annual turnover of at least €200,000 and to sell physical goods.
• Triffin describes its inventory finance as a way to spread the cost of supplier bills: Triffin pays your suppliers and you pay it back in up to six months. Funding is subject to credit checks.

Both lenders set their own criteria, limits and fees, and those can change. Check the current terms in any offer before you sign.

Letters of credit and bank trade finance

Banks also offer traditional trade finance, such as a letter of credit, where the bank promises to pay your supplier once agreed shipping documents are presented. This can reassure a new supplier, but it involves documents, bank fees and usually an existing banking relationship. It suits larger or riskier orders more than routine repeat purchases.

• Supplier-payment finance: best when the pressure point is paying the supplier before the goods ship. Each invoice is funded and repaid separately.
• Stock financeFunding used to buy stock or inventory, where the lender pays suppliers or advances against stock held and the company repays as goods are sold.: best when you hold stock for a long time before it sells, such as seasonal ranges.
• Working capital finance: a lump sum for general cash needs, such as stock plus wages and rent in a busy season. It is not tied to one order.
• Invoice finance: useful once you have invoiced customers who pay on long terms. It releases cash at the end of the cycle, not the start.

Where the gap is funding a confirmed customer order rather than routine stock, purchase order finance is a specialist alternative. Many importers use more than one. For example, supplier-payment finance for the purchase, then waiting for customers to pay. The aim is to match the finance term to the time the cash is actually tied up.

Supplier-payment and stock finance are usually priced as a fee for each funded invoice, linked to how long you take to repay, rather than as an annual interest rate. A fee that looks small for two months can be expensive when you work out the annual equivalent, so compare total cost, not the headline percentage. Ask each lender for the total amount repayableThe full sum a company will pay over the life of a loan or finance agreement, including the amount borrowed, interest and all fees. in euro, any set-up or late-payment charges, and what happens if you repay early or late. Our guide to documents for a business loan application explains what to have ready before you ask for quotes.

Do not forget currency risk. If you pay suppliers in US dollars or sterling, the euro cost can move between order and payment. Some providers offer multi-currency payments. Your bank can explain hedging options.

• Trading history: most lenders want at least a year of trading and filed accounts, so a new company may have fewer options.
• Turnover and gross margin: enough margin to cover the finance fee and still make a profit.
• Stock turnover: how quickly goods sell, and whether they hold their value.
• Supplier relationship: how long you have bought from the supplier and whether goods arrive as ordered.
• Customer base: whether you sell to a few large customers or many smaller ones.
• Credit record: lenders that search the Central Credit RegisterA database operated by the Central Bank of Ireland holding information on loans of €500 or more. leave a record of the enquiry. They must check it for applications of €2,000 or more.
• Tax compliance: a current tax clearance certificateConfirmation from Revenue that a company's tax affairs are in order. helps, and staying tax compliant is also needed to keep postponed accounting. Our guide to business loan requirements covers the wider checks.

• Confirm your company is registered for VAT and Customs and has an EORI number.
• Check that postponed accounting is being used on your import declarations and reported in PA1 on the VAT3.
• Ask your customs agent whether a deferred payment authorisation would suit you.
• Map your cash timeline for one typical order, from deposit to customer payment.
• Have your latest filed accounts, recent management accountsInternal financial reports, usually monthly or quarterly, showing a company's recent trading, balance sheet and cash position. and six to twelve months of business bank statements ready.
• Keep copies of supplier invoices, pro formas and shipping documents.
• Work out your gross margin on the order after freight, duty and the finance fee.
• Decide which currency you will pay in and how you will handle exchange-rate risk.
• Ask for the total amount repayable in euro before you accept any offer.

Stock and supplier-payment finance are within our panel. Treyd and Triffin both offer products where the lender pays your supplier and your company repays later. Tell us about your company, your suppliers and the order you need to fund, and we can tell you which lenders on our panel may consider your company; we do not give financial advice. Every application is subject to the lender’s own checks, and we cannot guarantee an offer, a limit or a timescale. Welcome Finance is a commercial finance broker, not a lender, and is not regulated by the Central Bank of IrelandIreland's financial regulator and part of the Eurosystem.. We work only with companies registered in Ireland. See how we are paid.