Supplier price increases often come with a short notice window — sometimes as little as 30 days before the new rate takes effect. If the goods in question are a core input to your product or service, buying a larger-than-usual quantity at the old price can lock in your margin for months ahead. The question is whether you have the working capital to do it.
The margin-protection calculation
Suppose your supplier announces a 12% price rise on a material you buy regularly, effective in six weeks. If you typically hold six weeks of stock, buying twelve weeks at the current price protects six weeks of margin. The saving on margin can more than cover the cost of a short-term Credicorp facility used to fund the extra stock purchase (illustrative reasoning — your numbers will differ).
Risks to plan for
- Storage costs: bulk stock requires space, and holding costs eat into the saving.
- Demand risk: if your sales slow, you may end up with excess stock that ties up capital for longer than planned.
- Quality or shelf-life: for perishable or time-sensitive goods, buying ahead may not be viable regardless of price.
Structuring the facility around the stock cycle
A Credicorp facility can be sized to cover the incremental stock purchase, with repayment structured to align with the period over which you will use and sell that stock. If you expect to work through the extra inventory over three months, a three-month repayment term keeps the cost predictable and matched to the revenue stream it protects.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: Buying stock ahead of demand with business finance, Paying suppliers early to secure settlement discounts.