Receiving a purchase order from a department store can mean a big boost to your business. However, as a distributor or supplier you may not have access to the capital you need to deliver the finished goods and products that your new customer just ordered.
If your manufacturer is located offshore, you may not have a readily available line of credit to provide advance payments as required by these companies. Most banks will not lend money against a purchase order because of the performance risk associated with the delivery of the products. If they advance funds and you don’t deliver the goods there will be an issue with paying back the bank.
It is not uncommon for larger customers to require generous payment terms. Couple this with long lead times with your manufacturer and you may end up with a 120+ day trade cycle. When financing options are limited, having a 120+ day trade cycle which includes the time to order, receive, and distribute the goods and then wait for payment is nearly impossible. Forget seeking out new contracts or if your products sell-through and they reorder; your working capital will be tied up with the big customer. You may lack the working capital to pay employees, pay the manufacturer, or pay overhead expenses necessary to keep operating. In some instances, you may also need additional equipment or staff to fulfill a large contract.
If this sounds like your business, it is important to know that many distributors and suppliers have turned to Capstone for invoice factoring and purchase order financing to address their immediate and long-term cash flow needs required to grow or support their operations.
Some of the solutions Capstone offers include:
One of the challenges you may be facing as a supplier is your company’s credit score. We often find this holds many companies from growing their business. When we work with you to develop a funding program, we use the strength of your customer’s credit to determine how much we can advance against your receivables instead of your company’s credit score. Whether you are interested in factoring invoices for one client, or for multiple clients, you never have to be concerned that your credit is going to hold you back.
Whether you are a distributor or supplier, you need to have the materials on hand or finished goods to fill orders. This can be challenging if your existing lines of credit are maxed out and you cannot increase them, or if you do not have access to lines of credit.
Capstone can help with purchase order financing (or PO financing) and invoice factoring which allows you to increase your working capital, deliver your presold goods and offer more flexible credit terms to your clients. We understand in order to remain competitive in any industry, you need to be able to fulfill the terms of your agreements, but you also need to be able to offer favorable terms to your clients. We will work with you to determine what products best meet your needs and help design a funding package that addresses those needs.
Every business owner has different funding needs. Capstone takes the time to discuss your long-term goals, current financing needs, and potential future financing needs. We then find the right solution for you using a combination of funding tools to best meet your needs. Another advantage of factoring is you are not going into debt. We provide funds against invoices that are already issued to your end buyer, and we collect them when they pay their bill to you. This means fast cash for you, rather than waiting 30 to 90 days to collect payment on goods you have already delivered.
Whether you are a distributor or supplier, you need to have the materials on hand or finished goods to fill orders. However, once the finished goods have been delivered, you may have to wait up to 90 days for the customer to pay for the goods. When you work with Capstone, you can submit your invoice to us after the finished goods are delivered to your customer and receive an advance against the invoice. No more waiting for customers to pay. This allows you to move onto the next contract or project in advance of waiting on the payment terms offered to your customer. Whether you decide to factor a single invoice, or prefer to factor multiple invoices, we can help find the right solution for your business.
1You submit an invoice/ progress payment on work that has been completed
2The invoice is verified with your client
3Capstone provides immediate funds
4Your client remits payment within their payment terms which is typically 30 to 60 days
5Capstone issues a rebate for the remaining reserve balance, less the factoring fee
If you are a distributor or a supplier, you could benefit from our purchase order financing products. Purchase order financing allows companies to take advantage of growth opportunities. Distributors and suppliers can gain the ability to bid on high profile (and high margin) contracts which will increase industry presence and provide customers with the confidence that their orders will be fulfilled in a timely manner.
Capstone works closely with distributors and suppliers to secure funding based on outstanding purchase orders. Rather than focusing on your company’s credit score or balance sheet, we base our funding decisions on the strength of your customer and their creditworthiness. We take into consideration the length of time they have been operating, their net worth, financial statements, and how current they are on paying their vendors.
Purchase order financing will benefit you in numerous ways including:
Capstone can also issue letters of credit or funds which will allow you to secure presold goods necessary to deal with new sales. This can all be accomplished without you having to deal with time-consuming bank credit applications and long waiting periods.
The combination of purchase order financing and letters of credit can provide the critical capital required to get your customer’s orders fulfilled. A letter of credit is a document produced by a financial institution delivered to another financial institution that guarantees payment of a certain amount. It is most often used between banks that are in different countries, for the purpose of international trade. If as a business owner you pursue import financing with a manufacturer from a foreign country, they can more confidently accept your proposal to work with them even if you don’t have the money to pay them upfront. The letter of credit will serve as a guarantee of payment from your bank to theirs, as long as they hold up their end of the previously agreed-upon transaction. This removes the risk that your supplier doesn’t perform or deliver the goods to the standard your end-customer requires.
With purchase order financing and accounts receivable factoring you can continue to grow your business, hire new employees, and take advantage of vendor discounts. Having cash on hand, or on-demand, ensures your business can continue to grow and thrive in these challenging times and not be concerned about the cash flow you need to meet your everyday obligations. Further, these financial tools are just as scalable as your business. You will not need to go back to the bank for a larger line of credit to take on new orders. As long as you can procure the contract, you know you’ll be able to fulfill it with purchase order financing and accounts receivable factoring.
If you are a distributor or supplier scrambling to make sense out of these challenging times, let a Capstone representative explore the various financing options available to you. We help our clients look beyond the fog of uncertainty to help businesses thrive and experience long-term growth.
Capstone is committed to helping distributors and suppliers in various industries. For more information regarding our financing options, please call us at (212) 755-3636 to speak with a representative today. We will work with you to develop a customized financing program that will allow you to accept larger contracts, purchase raw materials needed to fill existing contracts, or meet your immediate cash flow needs.
