You Can Finance Purchase Orders & Contracts … Can’t You? Yes Virginia .. You Can!
OVERVIEW – Information on purchase order financing in Canada. Business financing and funding solutions can be attained via P O Finance and Contract monetization - Here's why and how , as well as some other alternatives
Purchase order financing in Canada... works. In a lot of cases funding your contracts and P O’s will help take you to the next step in sales and profit growth. Let's dig in.
Firms that are in the SME (small to medium enterprise) often have been challenged with financing inventory / product needs as they relate to new contracts or large orders. What a conundrum - having an order and not being able to fulfill it.
Enter, stage left - P O Financing.
One of the hidden benefits of this type of financing, which is more expensive than traditional financing, is the fact that it allows you to demonstrate to more traditional lenders, i.e. Canadian chartered banks and asset based lenders, that your firm can establish higher levels of sales with clients you might otherwise not be able to facilitate with your services and products.
Many different industries can take advantage of P O / Contract funding - exporters, importers, firms in wholesale distribution, and of course manufacturing companies.
The entire concept of purchase order financing is based on what’s going to happen, not what has happened. The essence of the financing is the ability of your supplier to be paid by the inventory finance and purchase order finance firm in advance. The result - you complete your transaction - ship and bill your goods/services, and can bill and collect on those receivables and... profits!
The one key technical point of inventory and purchase order finance is the fact that the firms that finances these two items often has no interest in financing your receivables - they are in fact just specialized lenders that are experts in inventory and purchase orders and letters of credit .
That raises a technical point you must understand, which is simply that the inventory and P O (Purchase order) finance firm expects to be paid when you generate an account receivable. Therefore it is critical that you either have a receivable financing facility in place, of that your bank line of credit allows you to facilitate the drawdown of that account receivable.
The good news - many firms can finance both your orders, as well as your receivables.
You can expect to pay higher rates for financing inventory and purchase orders the reality is that you can increase sales significantly as other traditional finance entities have backed away from this type of financing.
So, how does this all work ?The overall process for purchase order financing is fairly straight forward - based on our inventory and purchase order and contracts in hand you identify the supplier arrangements you need to make in order to facilitate products.
Payment is made to your suppliers via cash or a letter of credit. If your gross margin is 30% and your purchase order is for 100,000.00 then naturally the purchase order or inventory finance firm usually is willing to advance 70k to your supplier as payment in full. At that point when goods are shipped and a receivable is generated then your P O finance partner expects to be paid.
Don't let your ability to finance your company be an obstacle to growth. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business finance needs.
Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
7 Park Avenue Financial
2910 South Sheridan Way
Office = 905 829 2653
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.