Purchase Order Financing – A Success Story
For the month of February, we are featuring a company that approached us with a need for purchase order financing as well as invoice factoring for their manufacturing business. This client assembles and sells household products that are found in hardware stores across the nation. All assembly is performed in-house, and as a result, the company first needed assistance with acquiring the materials required to fulfill larger customer orders. Our client was facing a common dilemma in the factoring world – their customers were submitting larger purchase orders, but the client was having difficulty completing those orders due to financial constraints. As a result, they turned out to be a perfect candidate for two different types of working capital solutions:
Purchase Order Financing
In order for our customer to even begin work on their new orders, they first had to purchase the necessary materials. With these larger orders, they found themselves unable to fully fund the materials acquisition on their own. The purchase order financing solution that we helped secure for our client allowed them to quickly accept and begin work on the new orders they were now receiving from large, big box retail stores. These were customers that our client could not afford to upset. Therefore, efficiency was a key factor in providing the necessary purchase order financing facility.
Invoice Factoring
Upon completion of the assembly process, our client was able to ship the first large product order to their customer on time. However, given the steady flow of new purchase orders, there was still a need for additional working capital. Since the client’s own funds were largely tied up along with the purchase order financing they used to complete orders, they still had overhead and other expenses to cover. This is where the invoice factoring facility they obtained became invaluable. By factoring their receivables, our client was not forced to wait the 30+ days for their customer to pay. They obtained the working capital they desperately needed as soon as their customer took delivery of the order.
Perhaps the greatest need our client faced was covering their payroll. With their new found growth, they were forced to hire additional staff and pay more overtime to existing employees. Since the client’s customers do not pay their invoice for 30 days or more, the additional working capital provided by invoice factoring was of the utmost importance to ensure that the bi-weekly payroll was consistently made during this period of rapid growth.
Conclusion
While the solutions that we were able to secure for this client are very typical within the accounts receivable factoring world, only the best factoring companies have the ability to provide both purchase order financing and invoice factoring solutions. Should your business have a need for immediate working capital, there is a good chance we have the right solution for you. If you’d like to discuss your current situation, or simply have some questions about our working capital programs, feel free to contact us as we’re always more than happy to help.