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How to use borrowed money to make money for a business,

Peterdalkey · 2014-01-09 11:42:50

Lets say you have trade purchases on credit of €1,000,000 per annum on normal monthly account terms. Most good Irish payers pay all January invoices at the end of Feb, so 45 days average credit received. If you were to negotiate 3% discount with suppliers for payment within 7 days, you would have an extra €30,000 gross…

09-01-2014 11:42am

#1

Peterdalkey

Closed Accounts Posts: 2,091 ✭✭✭

Join Date: January 2012

Posts: 1977

Lets say you have trade purchases on credit of €1,000,000 per annum on normal monthly account terms. Most good Irish payers pay all January invoices at the end of Feb, so 45 days average credit received.
If you were to negotiate 3% discount with suppliers for payment within 7 days, you would have an extra €30,000 gross margin each year.
If you had to borrow at say 8% to fund this, the cost would be € 8328 per annum (45-7= 38 days interest on €104110 @8%)

Net benefit €21672 per annum!

If you had the cash available in the business, you get to keep the full €30K reward!!

German SMEs have been doing it for years!! Nice!

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