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Inventory & Purchase Order Finance In Canada : Bottom Line ? It's Not Complicated!
Information on key benefits and aspects of business inventory finance and purchase order financing in Canada
The reality of these two financings is that they can be arranged individually, but quite often are sought by business owners as a combination as they are inherently linked by their very nature. That is say that your firm receives a purchase order (p.o.) or contract, and as a result required working capital and additional cash flow to buy the inventory required to fulfill those customer needs.
Business owners want to ‘unlock ‘the cash and working capital that they have in inventory. If your firm qualifies for traditional bank financing you will be margined against the inventory, in much the same manner as a bank would margin receivables. The challenge in the current financial environment is that banks, which have traditionally not enjoyed financing inventory, are even somewhat more reluctant to embrace this type of financing these days.
So are there solutions. Yes there are. In Canada you need to seek out and explore the services of a trusted and credible business financing advisor who can guide you through the inventory and po... financing maze. The basic solution to the business inventory finance challenge is a collateralized loan against inventory. What has to be addressed though is the relationship of that loan or working capital advance to the security you might currently have in place against your business vis a vis receivables , etc . That requires somewhat of a skill in order to satisfy all secured parties and give you the working capital you need in a manner that makes sense.
The exercise of obtaining this type of financing is worth if when you have a significant investment in inventory and your inventory asset can be collateralized and liquidated in some manner .We say this , because, as most business owners know inventory come sin three forms, raw materials, work in process, and finished goods. So care must be given in the analysis of what type of inventory you maintain and what are those three different levels within your working capital cycle.
Ultimately you should explore business inventory and purchase order financing ( In p.o. financing your suppliers are paid directly by the purchase order finance firm) if you are always short of cash flow and working capital, or have seasonality in your business cycle – i.e. huge amounts of product required for the Xmas season would be a good example.
Your firm is a candidate for business inventory financing if you can demonstrate the ultimate saleability of the inventory, as it of course becomes the main collateral. If you are unable to demonstrate the marketability of your inventory as collateral you will have a major challenge in obtaining this type of financing.
If your firm identifies inventory as a major working capital component and you have solid gross margins (inventory financing can be more expensive than traditional financing) you should explore the benefits of such business financing.
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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 .
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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.
Stan Prokop
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