Purchase Order Financing is used to pay your suppliers, laborers, or other
intermediaries for goods or services to generate additional sales. A
company will need purchase order financing when:
You need expertise to handle the financing
You need additional working capital
You need a quick response to an immediate sales need
You don't want to incur additional credit risk, be it foreign
You want your buyers and sellers to not know each other
You want the opportunity to make additional profit
We understand all the above reasons and will work with you to
fulfill your needs.
We finance purchase orders for all types of
transactions that include:
U.S. Supplier to U.S. Buyer
U.S. Supplier to Foreign Buyer
Foreign Supplier to U.S. Buyer
Foreign Supplier to Foreign Buyer
Every purchase order transaction stands on its own. We look at your
business history, the credit worthiness of the buyer, the ability of your
supplier to produce the goods, and if the transaction is profitable for all
We consider funding those organizations with a track record of producing
goods. Your company may be young or a start-up, but your company management
must have a proven track record to produce the goods.
Buyers Purchase Order
Your buying firm must be reputable with a good credit line. The purchase
order must be verifiable.
Your suppliers must know your product and be able to produce it in time and
to meet your buyer?s terms. The supplier must be a firm with a good
business history and track record of producing goods.
The transaction after all expenses must make a profit for all parties.
Payment of the money lent to support the transaction can come from any
number of sources such as factored receivables.
Purchase Order Financing is available only to qualified customers. P.O.
Financing falls into two types:
Finished Goods refers to transactions where the goods are never touched by
you. Usually these goods go directly from your supplier to your buyer. You
never take direct possession.
Non-Finished Goods are when you the seller take possession of the goods
either in a raw state (such as yarn to make blue jeans) or a semi finished
state (partially sewn blue jeans). In either case you must take
possession of the product.
Finished Goods are easier to finance than Non-Finished Goods. We will need to assess your
ability to complete the transaction in
processing the goods for the final shipment to your buyer. We
finance both Finished and Non-Finished purchase order
In order to consider P.O. Financing for your firm we will need:
Completed P.O. Application Form
Your invoice to buyer
Your supplier's invoice
Your purchase order to your supplier
Profit on transaction - gross margins >18%
P&L (most recent)
Balance Sheet (most recent)
Time frame to produce goods
Credit information on your buyer
Finished Goods or Non-Finished Goods.
Generally we charge 2-5% (sometimes more, sometimes less) one time fee for
purchase order financing on the gross amount to be paid by the buyer.
Sometimes there may be an additional interest charge on the money advanced
if the purchase order takes greater than 30 days to complete. Every
purchase order pricing is individual and unique. This purchase order fee
does not include the factoring fee which may cost an additional 3% to 6% if
you are factoring the receivable. We will consider financing a
purchase order transaction to be paid out by another factor or lender. In
order to see if the transaction will make money for both parties, please
fill out the worksheet section of the application form. As you can see the total cost of purchase
order financing fee and factoring fee can range from 4 to 11%. Since both
of us need to make money, the gross margin should be greater than 18%.
Example 1(U.S. Supplier to U.S. Buyer)
You are an apparel manufacturer. You have been in business for 5 years
and have a good Profit and Loss Statement and Balance Sheet. You just
received a large order and are maxed out on credit from your suppliers.
Your sales price to your buyer is $100,000 and your total cost to produce
the goods is $75,000. Your gross margin is 25%. We will purchase the
goods for you from your supplier, give you 45 days to produce the goods,
charge you a 5% purchase order fee ($5000, 5% of $100,000) and factor your
Example 2 (Foreign Supplier to U.S. Buyer)
You are importing telescopes from China. You do not need to touch the
goods, they will be shipped directly to the buyer, a large U.S. retailer.
The cost of the goods is $500,000 and you will sell them to the buyer for
$700,000. Gross margins are 20% (after all importing costs). We open a
Letter of Credit to your supplier and will factor the receivables.
When the goods are shipped your Chinese supplier will get paid. When the
goods are landed in the U.S. and shipped to the U.S. buyer, we will factor
the receivable and pay the purchase order from the funds advanced.
Example 3 (Foreign Supplier to Foreign Buyer)
You are an international fish broker. You are buying fish in Jakarta
from a reputable supplier and selling it to a credit worthy buyer in
Venezuela. The gross margin on this sale is 18%. We will finance the full
transaction by wiring funds to your supplier of fish for $40,000 and
collect payment from the Venezuelan buyer of $55,000, less our factoring
fees, insurance and inspection fees.
Types of unusual purchase order funding we have done include
-Capital Equipment Acquisition
-Non-U.S. Crossborder Transaction Funding
-Mold and Dye Manufacturing Costs
-Research and Development Costs
-Chapter 11 Bankruptcy Funding
Unique Transaction Examples
1) Client had a job to refurbish 2 computer chip making machines.
The machines, once state-of-the-art, are now 5 years old
(totally obsolete for computer manufacturers, but perfect for consumer electronic
manufacturers, etc.). They needed $750,000 to buy old machines and for parts
and labor to complete them. We funded this. The machines, upon satisfactory
inspection, sold for $1.3 million.
2) Client had a contract to sell a $220,000 computer to a major company in Austria.
The equipment had to be purchased in Singapore for $150,000, which we funded. A Letter
of Credit was not acceptable, so we funded the transaction through direct wire transfer
through our bank's Hong Kong office to its affiliate in Singapore.