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Use Christmas Seasonal Purchase Orders to Obtain Additional Capital

On the face of it, the Christmas season is a happy time for many shops across the country. People are in the mood to buy gifts and spend money, and that means more profits for retailers and wholesalers. But if you own a wholesale business, you may find yourself deluged by large orders for which you don’t have the capital to buy raw materials and supplies. Fortunately, you can use your Christmas seasonal purchase orders as a way to secure the financing your need.Use Christmas Seasonal Purchase Orders to Obtain Additional Capital

The Mechanics of Purchase Order Financing

It’s easy enough to acquire financing using your purchase orders. First you need to approach a finance company which offers this service. They will then investigate the authenticity of the purchase order and also evaluate the likelihood of payment by the retailer when you deliver the products they ask for.

Then they will ask for your supplier and payroll needs, and also calculate the profits you can make off the deal. If your potential profits warrant the investment according to their standards, the finance company can then jump on the deal and help. They will then open a line of credit or guarantee payment for your suppliers, up to half the volume of the purchase order. Some finance companies can even offer a larger percentage.

A schedule can then be made so that the finance company can make sure that the delivery will come through as promised. All payments come through the finance company. When you deliver your goods to the retailer, the finance company collects the payment.

Usually this is not cash. Instead, you have an account receivable detailing when you will get your money. This can be as long as 30 or even 90 days. Your financer can also forward a percentage of the profits once the invoice has been processed. When the retailer finally pays in full, your finance company gets back the money they used to pay your suppliers plus a fee for their services. Your finance company can then forward the rest of your profits to you.

Why Choose Purchase Order Financing?

Most of the time, you choose this option because the bank won’t give you a choice in the first place. Banks are not exactly in the mood to give out loans to small businesses, even if you do have excellent credit or even if you have ample collateral. That’s because they don’t feel that they have enough to gain out of the deal.

But with purchase order finance companies, you actually have the option of getting some financing for every large purchase order you receive. The application process for this type of financing doesn’t take as long as a traditional bank loan and the approval rate for large orders is much higher as long as you can demonstrate a healthy profit margin.

With this type of financing, you do not have to refuse Christmas seasonal purchase orders because of a lack of funds. Each of these orders can then be used to increase your profits and grow your business.

 

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Taking Advantage of Transportation Factoring

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In the recent American Trucking Associations’ Management Conference and Exhibition, ATA Chief Economist Bob Costello took the podium and gave a matter of fact forecast on the trucking industry. In his speech, Costello said that “At the moment, fleets are expanding slowly.” Later on, Costello shared a nugget of optimism when he said, “However, once capacity does tighten, carriers will see improvement on their bottom line.”

Currently, freight rates are lagging behind the rising costs of fuel, employee recruitment, and equipment. Until capacities tighten, it is a good idea for carriers to take advantage of transportation factoring. To be short and sweet, factoring is the process of selling your accounts receivable to a third party company at a discount so that you can claim your money without waiting for the shipper’s payment in 90 days.

As a business owner, you understand the importance of being liquid all the time. There is no shame in availing the services of factoring companies even if other companies might think that you are having cash flow problems. On the contrary, you might enjoy the many benefits it offers.

Quick Financing

In this time of economic troubles, daily expenses can be problematic, especially when your cash flow is hampered by the shipper’s delayed payment. If you are facing this scenario, factoring will take away all your worries. You will be able to meet payroll, address unexpected repairs, or pay the bills.

If you are considering taking out a loan from a bank to boost your capital, just remember that banks are infamously slow in processing loan applications. It is possible that your clients have already made payments before you receive any loan money from the bank.

Reduced Costs

Suppliers will not give you any discount if you are also promising payment like your customers. However, with cash on hand, you can immediately pay for your needed supplies at a discount, reducing your overhead expenses.

Avoid Collection Hassles

Collecting payment can be very tedious. Moreover, it restricts your employees from performing tasks that are crucial for the growth of your company. If you want, you can also request the factoring company to do the collection for you, freeing up your employees to perform more productive duties.

Reduce Staffing

Aside from collection, freight factoring companies also offer credit checks. As a result, you do not need to employ additional heads just to investigate the creditworthiness of your clients.

Enhanced Business Management

Having money in your pocket opens up many opportunities that were not previously available to you. You now have the flexibility to offer customers attractive terms. Moreover, you can pay existing debt to improve your credit rating.

 

With expenses like fuel costs and employee retention rising faster than freight rates, trucking companies are looking at transportation factoring companies to provide badly needed cash. Other than access to quick financing, factors help in reducing costs and staffing, relieving you from collection worries, and facilitates improved company management. When capacity tightens like Costello said, you would not want to be on the sidelines just because you failed to explore this option.

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How to Choose a Manufacture Factoring Company

Until recently, US companies have relied on foreign manufacturing plants. These manufacturing plants are located in countries like China and Cambodia, where the labor costs are much lower. But in the last couple of years, many industry experts are saying that US manufacturing is poised to make a comeback.

There are several reasons for this new trend. One reason is that the current manufacturing scheme is becoming more expensive for US companies. Labor costs are increasing overseas, and it’s also becoming much more expensive to transport these goods from abroad due to high oil prices. Then there’s also the fact that US manufacturing is still the leader in terms of technologies. As Steve Forbes says, the resurgence of US manufacturing is because the US has more qualified people who have the proper training.

This is welcome news for the US manufacturing industry, so if you are part of it then perhaps you may be able to swing some sizable loans from your bank. But if your bank still has reservations or is taking too long to process your application, then you can always count on manufacture factoring services.

But of course, you need to pick the right manufacture factoring service. Here are some considerations before you make your final choice.

  1. Make sure the financing company fully understands your manufacturing business. Each type of manufacturing company has its own particular processes and challenges. A food manufacturing company is different from a computer parts maker.

So you need a factoring company which doesn’t just have experience in manufacturing but in the kind of manufacturing you’re involved in. This will save both of you a lot of time and frustration in negotiating a fair contract that’s amenable to both sides.

  1. Check the history of the management team of your factoring service provider. It’s not just the name of thecompany you have to check, but the names of the people running the factoring company as well. If the factoring company has a sterling reputation, make sure that the people running it have been involved in the company from the beginning. If they are new, check and see if the company they left has a good rep too.

You can’t be too careful. Some people have a bad impression of the factoring industry because of a few bad apples who took advantage of the credit crunch back in 2008, when the recession really had lots of companies scrambling for funding.

  1. Clarify the details of your factoring contract. The most important thing to clarify here is the amount or percentage of the accounts receivable you get in advance. Make sure that you know which conditions can affect this number.

Then you also need to determine how much you will pay to the factoring company. How much is the interest per month or per year? And if they are offering credit analysis, invoice management, and collection services, make sure you know what those things will cost you as well.

By choosing the right factoring partner, you can be part of the US manufacturing resurgence and take your manufacturing company to new heights.

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The 3 Benefits of Maintenance Factoring

If you are running a maintenance company, it’s not surprising if you find yourself needing short-term loans every now and then . One of your options is maintenance factoring, which is offered by financial companies specializing in the maintenance industry.

Instead of having to wait weeks and months for a company to pay for the services you’ve rendered to them, you can receive the bulk of the payment in advance from a factoring provider. You can get anywhere from 70% to 90% of the value of the invoice right away. Then when your client pays in full, you get the remainder of the money after the factor deducts their fees.

In some cases, maintenance factoring may be a better deal for you than a traditional bank loan. Here are some reasons why:

  1. You will get the funding you need. Regardless of news reports saying that banks today are becoming less tight-fisted, the awful truth is that their approval rate is very low. You’ll need to have a stellar credit rating, your maintenance business should be well-established, and you’ll need a significant asset as collateral. In fact, the US SBA has a very long list of requirements for you to consider.

On the other hand, the approval rate for maintenance factoringis quite high. Your bigger clients may be able to demand that they can pay in 60 days or more, but you can use their excellent credit to negotiate a good deal in the factoring agreement.

  1. You get your money much more quickly. A bank loan application can take weeks or months, with a lot of bureaucratic red tape to navigate. This can be terribly frustrating, since your needs are often immediate.

You may need the money because you need to buy new equipment and cleaning supplies, or you need to hire new workers to service new contracts. You may also be involved in some workers’ compensation issue, which can put a dent on your working capital. If you run out of working capital to pay for cleaning supplies or to meet payroll, you’ll have a serious problem on your hands.

With a factoring provider, it may take only two weeks or so to set up a factoring arrangement. After that, you can get your money within days of providing the service. That gives you a lot of leeway in terms of working capital for operational needs and for business growth.

  1. You can outsource invoice management and collection. Some factoring companies can manage your invoices for you and furnish you with reports. They can even do the collecting for you, which spares you the trouble of setting up a department and hiring new personnel.

This provides you with the clear opportunity to focus on what you do best, which is to provide for the maintenance needs of your clients. It’s always a good idea to stick to your strengths, so you should just let the experienced pros do these tasks for you.

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Who Really Benefits from Apparel PO Funding?

In the apparel business, getting paid involves a lot of waiting. You get a purchase order, so you need time to arrange a delivery from your suppliers to your customers. Then when the goods are delivered, the customer then makes you wait at least 30 days after delivery before you get paid. Sometimes this is 45 days or even as long as 90 days.

But instead of waiting while all these days pass, the apparel PO funding method gets you your money right away. You don’t even have to wait to arrange for the delivery before you get your money. That method is called factoring, which involves using the account receivable to get a cash advance. In the apparel PO funding method, you use that purchase order to get you the money you need.

So would you benefit from apparel PO funding? It depends. See if you can answer yes to any of the following questions:

  • Do you need the working capital? If you don’t have the money to pay for the material and labor required to fulfill the order or to pay your supplier, then you may have to pass on the order as “too big” for you. But with the PO funding, you use that purchase order to leverage funds.
  • Are you a newbie at trying to generate financing? If so, you’re not alone. It’s not always easy to get the money you need. Getting a business loan can be very complicated, and banks and other lenders don’t always make it easy on you.

In general, you’ll have to explain why you need the money. Your credit (not just your company’s but your personal credit too) must be really good, and you need to show some form of collateral.

  • Does the order require a quick response from you? Even experienced borrowers will need some time to arrange financing from traditional lenders like banks. By the time you get your money, your potential customer may have moved on to another company who has the capability to provide what they are asking for.

But PO financing moves very quickly indeed. You can get your money in a couple of weeks, and perhaps in less time than that.

  • Do you want to avoid shouldering risk to your credit? That’s not a problem with PO funding, because it’s not technically a loan. It’s more of a cash advance, so your credit is not affected at all.
  • Do you wish to keep your customers separate from your suppliers? If you’re a distributor, then this is probably the case. The entire process, however, will help separate your suppliers from your customers.

If you can answer yes to any of these questions, then at the very least you need to keep your options open when it comes to PO funding.

But all in all, it’s just a question of whether or not you want to take advantage of a profitable opportunity. If your profit margin is quite low, then perhaps it’s not for you. But if the purchase order represents a significant profit, then PO funding can help you get the lion’s share of the profits.

How Maintenance Factoring Solves Your Money Problems

In just about every industry, businesses including maintenance companies always aim for growth in order to increase profitability. However, growth opportunities often require a rather large amount of ready cash, and that’s where maintenance factoring comes in.

Case in point: one maintenance company was awarded a contract to provide maintenance services for Wal-Mart. This was truly a big boost for their business, but not without some hitches. With maintenance factoring, these problems were all ironed out and the company’s operations proceeded smoothly.

The Scope of the Maintenance Services

The contract called on the maintenance company to provide a wide variety of services.

  1. They were required to sweep the parking lot every day.
  2. They had to provide porter service.
  3. They were tasked to check on the paint on the walls, and to touch up the paint when they begin to peel or crack.
  4. They were required to provide janitorial services inside the establishment, which included vacuuming, dusting, and cleaning the windows.
  5. They were also asked to provide pressure cleaning services.

All these services required a lot of money to materialize. The company needed to pay for all the people they had working, plus they had to make sure that they had the tools in working order and they had ample cleaning supplies.

But of course, their problem was that they didn’t have enough money, because it was tied up in various accounts receivable. Other clients were paying 30 days or even 90 days after getting the services but with the cash advance the company got for these accounts receivable, they didn’t have to wait at all.

Late Payments by Major Retailers

While the scope of the contract with Wal-Mart meant big bucks, the payment arrangement is a bit tough. Wal-Mart, after all, does have a reputation for tight-fistedness. Major retailers usually take a much longer time to pay, and the maintenance company had to wait a few months to get the payment. But since Wal-Mart wasn’t their only client, that meant they would have had trouble coming up with the working capital to fulfill other jobs.

But with factoring, this problem was solved. Factors which specialize in the maintenance industry can expect such lateness and deals with it accordingly. They’re not like other factors who couldn’t take invoices that specify payments that late. Since Wal-Mart is a secure company, they know that the money would come, eventually.

So using the invoice from the Wal-Mart contract, the maintenance company could then serve their other clients with no difficulty.

Acquiring New Clients

Growth means getting new customers and new jobs, and the Wal-Mart deal can help with that. It’s all a matter of bragging rights. The company can always trumpet the fact that Wal-Mart deemed their services worthy of servicing the Wal-Mart establishment, and so other businesses which need maintenance services can be assured that the company is good enough.

Without maintenance factoring, accepting the Wal-Mart contract would not have been feasible, and growth would not have happened. The same advantages that this maintenance company received from factoring can also apply to your business.

How Debt Factoring Case Studies Illustrate Factoring Advantages

Ever since banks started to really tighten up their loaning procedures back in 2008, factoring services (also called debt factoring, invoice factoring and invoice discounting) have become increasingly popular especially for small businesses. The advantages they offer are quite remarkable, and you don’t even have to rely on their advertisements or just take their word for it. You can just take a good look at some debt factoring case studies to see how such services can help your business.

Here are some notable debt factoring case studies that can shed some light on these services:

The Almost Insolvent Painting and Rust-proofing Company

This company provided painting and rust-proofing services for big oil rigs. But they were losing money, and there was a time that they almost reached insolvency.

The company decided to try factoring, and because of that they were no longer required to chase down accounts receivable to get their money. That responsibility was passed on to their factoring provider. In three years, the company’s sales grew from $1.5 million to $10 million.

As this case illustrates, factoring can help you get the money you need to avoid insolvency, and at the same time it removes the burden of collecting from customers. Factoring here means giving you the breathing room you need to help you grow your business.

The Cash-Strapped Temporary Staffing Agency

This company was established way back in 1988, but in recent times it had problems running daily operations and meeting the weekly payroll. Their real problem was that their financing company wasn’t providing enough cash for their account receivable.

They then switched to another factor which offered better advance rates and a more generous financing option. The company was then able to get back the cash flow reserve they needed.

The lessons in these case studies are simple. The first lesson is that even established companies can have trouble maintaining adequate cash flow. And second, just because factoring is your last option doesn’t mean you’re stuck with inadequate cash advances. You can still switch to another factoring company which can meet your requirements.

The Electronics Distributor that Secured a Line of Credit with Accounts Receivable

This electronics distributor needed $20 million in profits each year to run smoothly, but at one point they realized their profits would not meet that mark. One of their products didn’t sell as well as they had hoped, and their customers usually paid about four months later. They had an unsecured line of credit, but the loss of profits meant that this would be reduced or even taken away from them.

So what they did was to offer their accounts receivable and inventory as the basis for a credit line. The credit limit was capped at 85% of the accounts receivables and 60% of the inventory.

As this case shows, accounts receivables can function as collateral. What’s more, they’re actually more effective as collateral than inventory.

So if you need the cash now, and your bank won’t oblige while your customers pay later, you still have an option. You can use factoring to get your money now, so you can keep your company afloat. Get the right factor to work with you, and you’ll see for yourself how well factoring can help small businesses.

 

The PO Finance Apparel Distributors Need: How It Works

If you have a small business, then you need a plan for growth. That’s the way it works, even in the apparel industry. You try to secure new contacts and perhaps move into new markets. You try to provide more products and add new ones. And of course, you need to make sure that you have the capital to fund your business expansion.

This is where some apparel distributors can have a problem. For example, let’s say you’ve been doing a good business supplying garments to retailers in your area. Now that you’ve established your expertise, one customer now asks for you to supply a volume you’ve never done before. You know you’ve got the chops to arrange the deal to the customer’s satisfaction, but your problem is that you may not have the capital to fund this business opportunity.

Of course, you’ll try to get some money from your bank. After all, that’s where your company’s bank account is. But banks, for all their improvements lately, aren’t really all that enthusiastic about lending to small businesses.

You’ll need to make sure that your business is in order, and that your credit rating is absolutely tops. That goes for your personal credit rating too. And then they drag their feet before you even get your money—if you get your money. That’s a very big if.

So if you get a big order, what you need to do is to use that particular purchase order to get the money you need. With PO finance apparel distributors should know how it works. This is the process:

  1. You get the huge purchase order. Instead of saying no to your customer, you say yes. This is the growth you’ve been waiting for, and it’s an opportunity not to be missed, especially if it offers a very nice profit margin.
  2. You approach the PO financer. Some lenders actually specialize in PO finance apparel deals. You tell them about the order and they ask for some pertinent details about the deal.
  3. They check out the opportunity. They’ll first see if the purchase order is real, because there are some scammers about who fake purchase orders to get some money. Then they check out your customer’s ability and willingness to pay the order, as well as your supplier’s ability to supply what’s been asked for. There are some other factors, but these are crucial.
  4. You get the money you need. Actually, the money doesn’t really go to you at all, but directly to your supplier. Often this takes only a couple of weeks after you first contact the lender. It’s a stark contrast to how banks operate, since banks consider two weeks as part of the initial stages of the loan application.
  5. The supplier makes and delivers the goods. The lender oversees this stage too, to see that everything’s going according to plan.
  6. Your customer receives the goods. When they do, they pay the lender.
  7. You get your profit. The lender then takes out the amount they invested plus a small fee for their services, and then you pocket the profit.

That’s how the PO finance apparel deal works. It’s really that simple and that easy.

 

Factoring Business Studies Lets You See the Bigger Picture

Click here for our factoring case study.
Click here for our factoring case study.

It’s not always easy to get a clear picture of how factoring can affect your business. Sure, factoring companies will tout their advantages, but some businesses would rather stick to bank loans. Some even make use of credit cards to spur the growth of their business, despite the astronomical interest rate.

But there are some factoring business studies which shed light on the subject so that you can get a better understanding of its purpose. For example, there’s a book of actual factoring business studies, and it shows success stories as well as failures. You can also read up on various articles detailing actual companies which underwent the procedure.

How Does Factoring Work for You?

You can probably read up on many articles about what factoring is. After all, it’s a simple process. Instead of waiting 90 days for that $100,000 payment, you can get your $80,000 now. Then the factoring company gives you the rest of your money (minus the factor’s fees) when your customer pays in full.

But with actual case studies, you can get to see how it works precisely. For example, you can ask a factor for references in your industry before you take advantage of the factor’s services. Then you will know exactly how the process works, how much you get in advance and how quickly, and how much you pay for the privilege.

This is crucial information. While your situation may not be exactly the same as the other business, you two have something in common so at least the process and the experience will be very similar.

Is It Right for You?

This, of course, is the crux of the matter. With actual case studies, you can know precisely what kind of circumstances led a particular company to seek factoring services. For example, a business may have some trouble getting a loan from a bank. It may have cash flow problems, or it may have had a business opportunity that needed an extra infusion of cash quickly.

With this info, you can then see how such a solution that worked for others can also signify that factoring can also work for you.

When Is It Not Right?

With a case study, you can also find out if it’s not the right solution for your business. Even factoring companies admit that factoring isn’t for everyone. For example, if you have a very small profit margin then you’re just giving your profit to the factor.

OR it may also mean that a particular factoring company isn’t right for you. Perhaps their advance is too small, or their fees are too high. Maybe they want to lock you in a long term contract when you only need a short term solution, or perhaps they want complete control on which companies you should do business with. That’s why you need to look at several factoring companies to see what terms they offer. The best offer may just be good enough for your needs.

 

Factors that Affect Apparel PO Finance Approval

You have a huge order from a customer and this could very well help pay your operational costs for an entire year. But the problem is, you don’t have the money to pay your supplier. Where will you get the money?

Factors that Affect Apparel PO Finance Approval
Factors that Affect Apparel PO Finance Approval

While you can turn to your bank, the loan approval you need is very iffy at best, and it takes too long. This is where the apparel PO finance opportunity comes in. You just use the purchase order from your customer to get the money you need to pay the supplier. Your chances of getting approval for the finance is much higher compared to banks, and it will all depend on the following factors:

  1. How profitable is this business opportunity? This is perhaps the most important thing that your lender will consider. After all, in general your lender will take a cut from your profits, so there has to be some actual profit involved. And because you’ll be sharing this profit with your lender, the profit has to be substantial.

So how much profit will you need? That depends on your lender, but some may require you to profit at least 30% from your investment. This means that if you invest $100,000 for the deal, you’re going to get back $130,000 from the customer. Others may require only a 20% profit, however.

  1. How good are you as a manager? Say you’re a distributor, and you’re the go-between of the manufacturer who makes the goods and the retailer customer who needs the goods for their own store. Can you help make sure that everything goes smoothly? One way to prove this is if you’ve done similar jobs in the past and the results were positive.

In other words, your credit rating may not be in question (that’s rather irrelevant in apparel PO finance), but your expertise will certainly be one of the considerations your lender will take into account.

  1. How reliable is your supplier? Everything starts with your supplier. Do they have the capability to produce what you and your customer needs? If you need a thousand dresses made in a month, then that means your supplier should be able to produce that number in that time. Retailer customers may also have some conditions set regarding the quality of the merchandise, and your supplier should be able to meet those conditions too.
  2. How will your customer pay? In the apparel and garment industry, payment can come anywhere from 30 to 90 days. That’s of course if they come at all. The lender will check not your credit history but your customer’s credit history, to see if they have any nasty habit of not paying or paying very late. Some customers, in fact, can even take an entire year to pay for what they ordered from you.

Sometimes, your apparel PO finance company may insist that a factoring service will have to be brought in so that your lender will be paid quickly once you deliver the goods. Factoring involves getting your money now instead of getting it when the customer pays in full, and this can hurt your profits.

But all in all, if the lender refuses to pony up the money so that you can fulfill the order, then this may be a good thing for you. Now you know that the customer is unreliable, and at least you’ve been warned.