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How To Be Successful In Purchase Order & Inventory Financing In Canada
Information on how and why inventory and purchase order financing works in Canada . These alternative finance solutions finance sales opportunities
With grown and revenue prospects come challenges. A large part of that challenge is simply the need to access cash flow and working capital now to facilitate those new orders and large contracts with either new or existing customers.
Clients we talk to normally have a very typical challenge – they have a large, sometimes huge! New sales opportunity. That opportunity requires an abnormal build up in inventory via those new contracts and purchase orders.
It is logical for every Canadian business owner and financial manager to initially survey their existing financing arrangements and determine if those financing arrangements either meet the needs of the new orders, or if additional financing is required. If you company is relatively new, or sometimes even at the start up stage that type of traditional Canadian chartered bank financing will be very difficult to achieve .
Naturally the other resources that could pull you’re financing together in this area and personal and outside resources, which most entrepreneurs either have reluctance for, or in some cases find it difficult to access and complete funding via that mechanism. The worst thing any business owner wants to do is of coruse to decline those purchase orders or contracts.
Purchase order financing, or alternatively, inventory financing, is a solid mechanism whereby you can access funds needed for your P.O. fulfillment. Depending on how you structure your transaction the P. O. financier may cobble together an assortment of receivable and inventory and equipment collateral in order to assist you in fulfilling your orders. In some cases, especially when it is demanded by your customer, the P.O. Finance firm can even issue a letter of credit on your behalf.
Purchase order and inventory financing can be applicable for all size of firms; however clients we meet with are either in start up mode, have had some financial challenges, and area unable to access what we would term as traditional working capital.
It should be stated of course that the actual purchase orders and inventory requirements that are being financing must come from reliable firms, either here in Canada or elsewhere. Their general reputation and stability must be able to be confirmed. That is of course done through areas such as public records, commercial credit reports, etc. In some cases our clients providing you with the purchase order might be a large well known public entity – all the better of course.
The benefit of purchase order financing is that it places emphasis on the overall quality of the deal, and your ability to fulfill the contract. Unlike traditional financing your balance sheet and income statement, with all those banker ratios, covenants, etc do not necessarily come into play in this type of financing. For that reason purchase order and inventory financing is a ‘boutique ‘‘specialized ‘type of financing that is more expensive than traditional financing. Business owners can significantly offset that expense by ensuring they have good gross margins on the transactions.
Manufacturers, wholesalers, and distributors are probably the best candidates for purchase order financing. When you meet with a credible, experienced and trustworthy advisor in this area that initial focus is simply document ting the transaction, i.e. info on your firm, the transaction, and the standard application and due diligence that comes along with any type of business financing in Canada .
Your firm should investigate purchase order and inventory financing if you feel you are a strong candidate for this type of financing based on your inability to access traditional financing to meet your sales goals. Work with an experienced partner, ensure you understand the application and diligence process, and you should then be able to successfully capitalize on this great alternative financing strategy.
7 Park Avenue Financial :
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 .
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
