It’s Not Your Imagination – Purchase Order Financing & Contract Finance Really Exist
OVERVIEW – Information on purchase order financing and how it is an alternative financing for Canadian firms with large new orders or contracts which lead to revenue growth and profits
Purchase Order Financing – Is it your solution to growth and working capital challenges? Canadian business owners and financial managers are always challenged when they are required to fulfill customer orders or new contracts where pre payment of a significant amount of goods is required to ultimately complete a large order or contract. Many times these new orders or contracts represent the potential start to a large relationship that has the ability to grow large revenues and profits for your Canadian firm.
Is there a solution? One that you might want to consider is purchase order financing. Under this type of financing, (also referred to as ‘P.O.Financing ‘) payment by the finance firm is made directly to your suppliers for your order or contract.
This allows you to complete the order, generate receivables from that order, and of course collect from your customer. The financing charge is typically in the 3% range, so there needs to be a clear indication that your firm has the gross margins to support an additional cost in the 3% range. Therefore firms with higher gross margins are great candidates for purchase order financing, and they are less so if they are in a low margin commodity type business. It’s all about the gross margin!
It is not hard to imagine why suppliers are asking for upfront payment. The typical reasons that we hear from our customers is that they:
• have exceeded the suppliers authorized credit limit for their firm
• the supplier is oversees and does not want to ship or commit capital to a firm in another country
• Your firm if new and has limited financial information or financial wherewithal to arrange financing of such magnitude
Remember also that your firm has what is known as a cash conversion cycle ( every firm has one ) There is a large of often 2-3 month from the time you receive orders, build and ship inventory or product, and then wait 30 days ( or longer!) to collect from your customer . Purchase order financing is a solid solution to your cash conversion cycle.
In putting together a purchase order financing facility we stress to clients that this is very much an alternative financing scenario, but it is clearly one that offers you a solution that traditional Canadian banking or lending would not offer.
Therefore your firm should be able to ensure that you can demonstrate the viability of your customer and that you can fulfill the order or contract.
One of the other advantages of purchase order financing is simply that from start to finish it can be set up in approximately 14-21 business days, assuming your full co operation on applications forms, backup info, etc. Most Canadian business people recognize that financing of a certain size in a traditional banking or term lending environment might take significantly long to complete.
In summary, purchase order financing is a unique niche within the area of business financing. If you are new, or not knowledgeable about this type of financing speak to a credible and experienced and trusted business advisor who will guide you through key areas of P.O. Financing including such things as minimum amounts that can be financed, credit application information, and the standard industry fees / rates.
7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
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.