Purchase Order Financing....

 

 

WHY Purchase Order Financing?

In today’s tight credit environment, more and more companies are turning to alternative and nonbank financing options to access the capital they need to keep business running smoothly. Whatever it takes to "Move Your Business Forward".


ABOUT FACTORING

Factoring is the outright purchase of a business’s outstanding accounts receivable by a commercial finance company or “factor.” Typically the factor will advance the business between 70% and 90% of the value of a receivable at the time it purchases the receivable. The balance, less the factoring fee, is released when the invoice is collected. The factoring fee — which is based on the total face value of the invoice, not percentage advanced — typically ranges from 1.5 percent to 5.5 percent, depending on such aspects as the collection risk and how many days the funds are in use.

 

Under a factoring contract, the business can usually pick and choose which invoices to sell to the factor — it’s not typically an all-or-nothing scenario. Once it purchases an invoice, the factor manages the receivable until it’s paid. The factor will essentially become the business’s credit manager and accounts receivable department, performing credit checks, analyzing credit reports, and mailing and documenting invoices and payments.

 

What is the Purchase Order Financing Criteria?

  • Must be in business for at least one year.

  • Must have experience and previous transactions with client or other similar clients.

  • Must have at least an initial $100,000 transaction minimum.

  • Must have a viable purchase order from a credit worthy customer or a Letter of Credit that satisfies our criteria.

  • Must retain a minimum of 25% profit.

  • Must be a USA company.

 

What is considered in a Purchase Order Finance Transaction?

  • Industrial and Manufacturing

  • Wholesale distributors/ importers and exporters

  • Government Contracts

  • Service Contracts

  • Retail and Apparel

  • Direct shipment/Drop ship orders

  • Project funding for the following costs:

  • Deposits

  • Raw Materials

  • Components and Sub-Assemblies Project-specific Labor

  • Finished Goods

  • Overhead

  • Direct Manufacturing

  • Shipping

  • Letters of Credit

  • Letters of Guarantee

 

 

                

Cash Flow Chart

Purchase Order Financing:

 

Is short term financial solution used to finance the purchase or manufacture of specific goods that have been pre-sold by the client to its credit worthy end customer. Funding involves issuing letters of credit or providing funds that allow clients to secure the inventory they need to fulfill pending orders.