Managing Working Capital Solutions from an Online Seller’s Perspective
TJ Hyland is the Head of eCommerce Partnerships in the U.S. at Payoneer, a digital payment platform that empowers businesses around the world to grow globally. His primary focus is building Payoneer’s U.S. partner ecosystem and supporting its ever-growing niche in the online seller market. He is responsible for everything from helping sellers complete cross-border transactions to assisting them with the capital they need to grow their businesses.
As an eCommerce specialist and foreign exchange consultant, TJ has a unique insight into selling on international marketplaces. After working with online sellers for the past six years, he knows the struggles they face on a daily basis—and how to solve them.
In this episode…
Many online sellers source their inventory from international markets like China, meaning that they often require a large amount of working capital. Therefore, for these sellers, having extra cash flow is crucial for keeping their inventory in stock and their businesses afloat.
However, many sellers face great challenges when it comes to funding or possessing additional working capital. This is largely due to the fact that most commercial banks are weary of giving loans to such businesses—despite the exponential growth of the eCommerce industry. So what alternative funding solutions are available for online sellers?
TJ Hyland, the Head of eCommerce Partnerships in the U.S. at Payoneer, joins Michael Fleming and Ellie Moffat in this week's episode of Sales Tax and More to talk about the various working capital solutions available for online sellers. Tune in as TJ shares how extra cash flow impacts the inventory cycle, the common sources of funding for online sellers, and how Payoneer's Capital Advance solution helps businesses grow globally.
Here’s a glimpse of what you’ll learn:
TJ Hyland talks about the common challenges that online sellers face with working capital
How extra cash flow helps businesses improve their inventory cycle
The drastic impact that running out of inventory has on an online seller’s momentum
TJ shares the funding alternatives available for online sellers
The advantages of Payoneer's Capital Advance solution compared to other working capital solutions
Where to learn more about Payoneer, and how to get in touch with TJ Hyland
Resources Mentioned in This Episode
Ellie Moffat's email: emoffat@salestaxandmore.com
TJ's email: tjhy@payoneer.com
Connect with Michael
Sponsor for This Episode
Sales Tax and More assists companies and their trusted advisors like CPAs with sales tax needs. They offer consulting and research, registrations, returns, and so much more. Over the years they have assisted thousands of sellers both foreign and domestic with their tax issues in the United States and in Canada.
To learn more about their services, visit https://www.salestaxandmore.com/.
Make sure to register and join the Sales Tax & More Webinar to get access to complex materials on tax in an easy-to-understand format.
Episode Transcript - Audio Version
[0:10] Intro: Welcome to Sales Tax and More, your go-to resource for all things state tax-related. Now, here's your host, Michael Fleming.
[0:26] Mike: Hi, Mike Fleming here Founder of Sales Tax and More and today's co-host of the Sales Tax and More Podcast, where we generally talk about everyone's favorite topic, which is sales tax. Today, however, we're going to step away from sales tax talk about managing working capital solutions from an online seller's perspective, with a very special guest from Payoneer. TJ Hyland. But before we get to introducing TJ, I want to introduce you to my co host, Ellie Moffat. Ellie, you want to jump in and say hi.
[0:58] Ellie: Absolutely. Hi everyone. It's great to be here as always, and I'm going to introduce Sales Tax and More quickly here. Sales Tax and More is a full-service consulting and solutions firm. We have a really great team here experienced tax professionals who are very dedicated to fulfilling your state tax and related needs. So we do a lot of returns, registrations, consultations, research, and like are named states more. So if you have questions about our services, please reach out and ask. We're more than happy to answer those questions. And we will give you lots of ways for you to reach out and contact us but I'm going to flip it back to you, Mike.
[1:32] Mike: Okay, thanks very much, Ellie. And, you know, I've known and worked with TJ over the years and found him to be very smart, very accomplished. He's the head of partnerships at Payoneer responsible for the US region. The primary focus has been to build the US partner ecosystem, you know, to support that ever-growing you know, a niche in the online seller market, you know whether that's helping those sellers, you know, do cross border transactions, or helping them with the needed capital to grow their businesses. As an e-commerce specialist and foreign exchange consultant, he’s a unique insight into selling on international marketplaces, he makes a great guest for us. So he's worked with online sellers for the past six years knows the struggles that they face on a daily basis. So at this point, you know, TJ, you want to say a quick hi, before we jump in here.
[2:31] TJ: Absolutely. Thank you guys for having me, as Mike led to, we work together and in various capacities over the last couple of years, generally, on the FX and you know, sales tax side, but today we're going to talk about a little bit different topic and I'll let you introduce.
[2:49] Mike: Yeah, absolutely. So, in the past, we've worked with Payoneer to help our clients move their money either back home to their home country. You know, easily and efficiently or to move money from their home country to pay their taxes here in the US and, well, you know, companies still need help with those types of issues, you know, the needs and challenges that online sellers face are constantly evolving. So, TJ, why don't you give us your perspective on what you're seeing some of these challenges are today.
[3:27] TJ: So we know you know, the online selling world is filled with different nuances of you know, what to do pulling different levers to get to a certain place of success. But with that, there are definitely challenges and, you know, one thing that I want to talk about today was the challenges that sellers have with working capital. If we look at the working capital solution that Payoneer has, which we'll talk about a little bit later, but if we look at capital in general, it's not always easy for sellers to get access to it, we say that you know, there's definitely a level in which you have to reach as an online business or as an Amazon or a marketplace seller. Before you become bankable before your bank will recognize you, as a business and offer you, you know, a line of credit or loan or something like that, because, you know, the notion of selling products online, although it's kind of taken the world by storm in the last four or five months, the notion of selling things online. As a seller, a third-party seller is still a little obscure to some of the more traditional financial platforms like banks or even alternative lenders. So some of the challenges that they face or sellers face is actually getting access to that capital. You know, I think it was something like a QuickBooks report, which last year said that 61% of businesses around the world regularly struggle with cash flow. So you know, Here we're talking about sellers. But in general, businesses are struggling with cash flow. And I think even more so new businesses struggle with cash flow, or they run out of cash, and in the seller world, you know, you're really spending your money on two or three different things. It's product or inventory, you're spending it on marketing or advertising. And then obviously, any sort of tax or, or payment obligations that you need to make after that. So if you don't necessarily have enough inventory, then you can't make your sales. If you don't have enough cash, you can't buy the inventory to make the sale. So it's that whole cycle of making sales, getting enough cash to fund your next order to make sure you have a product to make your next sale. You know, there are definitely huge gaps. And from a seller's perspective, that's probably one of the biggest challenges.
[5:55] Ellie: Yeah, I mean, it definitely is a big challenge for those sellers. So can you tell us a little About how an extra cash flow can help solve sellers' challenges?
[6:05] TJ: Yes, I touched on it there just really briefly, but the inventory cycle is something that is really a place where additional cash flow lends itself to. We know that a lot of sellers sourced their products from overseas. So whether that's from China from Southeast Asia, from India, and the cycle in which you find a supplier, place an order, then receive a sample, placed your full order, and then actually receive your products if they're coming by sea or by air, you know, you're working with a couple of months now. And if you are already a seller and you're looking to take your business to the next level, you know, this injection of cash flow can really help speed up that process. You won't have to wait Until you get the sales from all of your existing inventory. To make that second order, you can take the cash flow that you got now, while you're still making sales, and then pay for your orders, knowing that you'll make the sales eventually, on your original order to pay back any sort of a cash advance or working capital solution.
[7:25] Mike: TJ, this is something that we've been hearing a lot about, you know, over the last couple of months, you know, it's been exaggerated. But, you know, you build up such momentum and you've got your sales working, and you sell out quicker than you thought. You would think would be a good problem to have. But if you don't have the inventory there right away to replace it, you lose a lot of that momentum. So what I hear you saying is this can help speed up that that second order, get the inventory Moving through the cycle a lot quicker, so that it's less likely that we're going to be running out of inventory, you know, in these different situations,
[8:12] TJ: Right, and in terms of the marketplace situation, you know, selling on Amazon. Losing momentum, because you don't have enough inventory is usually drastic to your business because you've worked so hard to get the buy box or get on the first page of search results for certain keywords. And we could touch on marketing in a second but you, you get to work so hard to get your prime position on Amazon. And then because you have no more stock, then all that hard work over the last weeks, months, whatever it is to get to that point goes to waste because if you have no inventory, they're not going to list you on the first page is definitely not going to list you in the buy box. So then you kind of have to restart that process again. And what that does is it really puts a taxing toll on unintended tax people on your marketing budgets because that's generally how you get to the buy box. and if we talk about working capital, in terms of marketing budgets, it's a huge opportunity there. So you know, where we typically see the number two, top two spends are our inventory and then marketing so to, to touch on marketing, just briefly, you know, whether it's marketing within Amazon, which over the last couple years has become increasingly more expensive, because of, you know, I think it's something like 60 something percent of searches that used to begin on Google now actually begin directly on Amazon. So with that, Amazon controls that piece of the pie, they can increase their prices. Also, from a seller perspective, it's more competitive, so they know that you know, if we're all bidding on water bottles, then you know, they have the opportunity there to one-up each other. So you know, keeping up your marketing efforts keeping up your products in inventory or in stock, then allows you to not fall to second place third place fourth place behind your competitors, or in some cases behind Amazon if they're selling a similar product.
[10:18] Ellie: So funding is important. We know that and people are having issues funding. So TJ, what are funding alternatives available for sellers these days?
[10:31] TJ: Yeah, so the number one that comes up most often is probably Amazon lending. And it's been in the news a little bit lately, because they've sort of revamped with Goldman Sachs and their markets program. So, you know, there's a lot of theories behind why people would take Amazon lending over an alternative lender, a bank or you know, a solution like a Payoneer, some people believe that if you have a loan from Amazon, that they're less likely to shut you down for whatever reason because they obviously want to get paid back that loan, I have it on good authority that that means absolutely nothing, they will shut you down if they want to shut you down. And it doesn't matter if they give you a loan. So I wouldn't necessarily believe that too much. But in terms of alternative lending, Amazon lending is a great solution because they are already connected, they see your sales data, you know, there's probably no extra steps that you need to do. When you are setting up to sell on Amazon, you are providing them with the information that they need. Now, if we look outside of Amazon or outside of any marketplace, there are probably the alternative lender worlds, which are far better for sellers than banks, as we talked about earlier. Banks just don't really still understand. Sellers, even if it's a regional bank, or Citibank or JP Morgan or wherever use there's still a big gap in the knowledge there. So if you're looking at alternative lenders, like, you know, the cabbages of the world or the on decks or any of those, you know, they can provide a solution to sellers here. But again, there's going to be a gap where they don't understand the selling online. And I think you then have to look back and say, who does understand the online selling experience? And to maybe jump into Payoneer? We absolutely do so for the last, you know, 15 years or so, we've been working with both marketplaces and sellers to understand different parts of the online selling experience. Yes, it was mainly surrounding the cross-border selling experience where businesses needed or received an account to help bring their funds back or make international payments or make tax and VAT payments. But we also realized that there are more gaps that we think that we can fill from a financial perspective. And our Payoneer capital advanced solution was actually derived out of customer feedback. So every year we send out a big customer survey and overwhelmingly in 2018, the response was that we struggle with cash flow, we struggled to keep our products in stock, we struggled to keep up with our competitors, to stay competitive in these marketplaces. So internally, we went back and, and drew up and it obviously took a lot of work but created a solution, with sellers in mind first, and leveraging the information that marketplaces like Amazon and Walmart will provide to you in terms of seller data to then turn around and say, okay, we will underwrite this business. And from there, you know, provide them in advance that will help their business go from here to here, to here.
[13:57] Mike: All right, so, you know, there's Payoneer Capital Advance sounds great. You've touched on some of the advantages for sellers, but they've been spread throughout, you know, our conversation here. Do you have any bullet point main advantages you can tell us of the Payoneer capital advance over other solutions?
[14:18] TJ: Sure. And I don't want to harp on it. But the first main and major point is that this product was designed for sellers specifically, You know we didn't have a lending product and then alternate to support sellers. It was from the ground up created for marketplace sellers. So to help them take their business to the next level, we view it as really opportunity enablement. So, whether it's a quick injection of cash to get a good deal from your supplier, if they say, okay, if you buy 20% more will give you 50% off or something like that, but perhaps You don't have that, you know, you don't have the money in the bank to, to facilitate that. Even if it is that much more, or that much less. You know, we view it as an opportunity to really invest in your market and go from just a business that's selling online to creating a full brand and giving you something that you can take that you started on a marketplace, off a marketplace, or grow off a marketplace, not necessarily leave the marketplace, but you know, start your own website, or start your own, you know, onto different marketplaces, and really focus on creating a brand. And what that does is it gives you the opportunity to have an end goal and an exit plan. So, with a lot of online sellers, they're serial entrepreneurs, and you know, you sell one product and maybe that one doesn't hit and then you sell another product. Maybe that was a big hit. And now you have the money and now you can move to the next level. But you know, there's always going to be these capital constraints. So, you know from the main advantage over the Payoneer capital advance solution is, you know, we've created two products now. One, that's a little about a three-term, sorry, a three-month term, but it's actually a flexible repayment model. So it's not necessarily that you're paying a specific amount back of the advance each month, we actually sorry, as the fee, you're basically paying a percentage back of your sales. So why that's advantageous is, as we know, in the seller world, you're going to have ebbs and flows, you're going to have big months of sales and low months. So if you're committed to paying, say, $5,000 a month with a traditional loan, and you have a really bad month of sales, maybe you ran out of inventory. You know, you're still obligated to make that payment and if you don't, there's going to be additional fees. The way that the Payoneer capital advance works are we take a percentage of your payouts from whichever marketplace towards repayment. So, you know, the way that it works is, you know, it's going to work out to be about a 100-day product. But if you have a couple of low months of sales, you know, perhaps you can go a little bit longer, say, three, four, or five months. Before, you know we have to start collecting a little bit more. So it's meant to really, you know, I keep saying it, but have the seller’s best interest in mind. You know, I think also, what's interesting about the Payoneer capital advance is, you know, it's not alone. And that's something that's really important to get across is we're not doing credit checks against the business or the person who's running it, which people obviously are concerned about at times. And, you know, we're, excuse me, really just looking at your sales on your Amazon account over the past six months before we can determine what to underwrite so we're not going to give you the opportunity to take $100,000 if your sales are $20,000 a month, so we're going to give you an amount or offer you an amount that is within your own means.
[18:15] Mike: All that sounds great. I mean, some great advantages there. Now I have what may be a silly question. Everything that we've worked with Payoneer has always been cross-border transactions. So I just want to make sure for our listeners that there are no limitations like can US companies selling on US markets use this for their inventories?
[18:37] TJ: That's a great question and probably something I should have covered in the beginning. This is exactly that. So it's US-based businesses that are selling within the US, whether it's on Amazon, US, or Walmart, US is absolutely available to take the solution and you know that that circles back to the beginning and why we really created this product because we worked with cross border sellers ensure we had, you know, Chinese businesses and European businesses and Canadian businesses that were selling into the US. But in the largest marketplace with the largest number of sellers, we didn't have a product that could help them no matter what it was. So this working capital solution gave us the ability to address that market and provide a solution for them at the same time.
[19:25] Mike: So TJ, I know there's a big appetite for products like this out there. How can you know sellers learn more about this specifically, or if they have questions for you? How can they apply? How can they reach you? What's the best way to go about doing that?
[19:42] TJ: Absolutely. So from the very jump, if you want to just find out some more information on our website, Payoneer.com, there's a page called Capital Advance and it actually says Capital Advance for Amazon and Walmart sellers. So you'll be able to find that. Otherwise, I'm more than happy for anyone to reach out to me directly and my email which I'm sure we can share later is tjhy@payoneer.com. Like I said, happy to speak to any seller, any business that has questions to see if this is the right product for you and, and like we always say Mike you know, I'm not going to push this on you if it's not right for you. No, it has to be right for you. If you are a business of different sizes and you prefer the terms that are more in a loan and you want a fixed amount and a fixed percentage and how that works, perhaps that's for you. But this product was created for sellers and we really think it's the best for sellers of all sizes, whether you're you know, been selling for just six months, whether you've been selling for five years and you're a multi-million dollar seller, and we have solutions for you.
[20:51] Mike: It sounds like a great opportunity for a lot of sellers out there. Especially when it's based upon the business's cash flow rather than hand on anyone's credit or anything else like that. So really appreciate the information today, TJ as always your great source of information and we want to thank you for appearing today. Anything that you want to say and to the audience here before we sign off?
[21:24] TJ: No, I mean, we talk about selling internationally and how people view it as a scary thing, and how there's a lot of unknowns surrounding selling internationally. And I think it's similar things could be said here about working capital, you know, from a person, you know, from a business perspective, you might only know about loans, you might not know what a merchant cash advance or working capital solution and even more so what Payoneer solution is but what you always have to do is do your research. And find out what product is right for you. And I fully believe that if you are a seller selling on a marketplace like Amazon or Walmart in the US, this is a great solution for you. So absolutely feel free to reach out and I'm more than happy to have a conversation.
[22:14] Mike: Okay, thank you very much TJ, and thanks again for being a great guest. For the rest of you out there, we appreciate you listening in. And if you have any sales tax needs we offer many solutions and services you can reach out to my co-host Ellie Moffat directly at emoffat@salestaxandmore.com. That's all spelled out so Ellie's last name is Moffat. So email her at emoffat@salestaxandmore.com or visit our website. We've got lots of great, you know, complementary resources up there, in addition to descriptions about our services, so that is www.salestaxandmore.com all spelled out. And we appreciate y'all being here and I look forward to seeing you the next time.
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