Purchase Order Financing Demystified

You’re looking for purchase order finance – Talk to us about PO finance and Financing Inventory in Canada

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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It's time. We're talking about purchase order finance in Canada, how PO finance works, and how financing inventory and contracts under those purchase orders really works in Canada. And yes, as we said, its time... to get creative with your financing challenges, and we'll demonstrate how.

And as a starter, being second never really counts, so Canadian business needs to be aware that your competitors are utilizing creative financing and inventory options for the growth and sales and profits, so why shouldn’t your firm?

Canadian business owners and financial managers know that you can have all the grown and new orders and contracts in the world, but if you can’t finance them properly then you're generally fighting a losing battle to your competitors.

The reason purchase order financing is rising in popularity generally stems from the fact that traditional financing via Canadian banks for inventory and purchase orders is exceptionally, in our opinion, difficult to finance. Where the banks say no is where purchase order financing begins!

It's important for us to clarify to clients that P O finance is a general concept that might in fact include the financing of the order or contract, the inventory that might be required to fulfill the contract, and the receivable that is generated out of that sale. So it’s clearly an all-encompassing strategy.

The additional beauty of PO finance is simply that it gets creative, unlike many traditional types of financing that are routine and formulaic.

It’s all about sitting down with your PO financing partner and discussing how unique your particular needs are. Typically when we sit down with clients this type of financing revolves around the requirements of the supplier, as well as your firm’s customer, and how both of these requirements can be met with timelines and financial guidelines that make sense for all parties.

The key elements of a successful PO finance transaction are a solid non-cancellable order, a qualified customer from a credit worth perspective, and specific identification around who pays who and when. It's as simple as that.

So how does all this work, ask our clients? Let's keep it simple so we can clearly demonstrate the power of this type of financing. Your firm receives an order. The PO financing firm pays your supplier via a cash or letter of credit - with your firm then receiving the goods and fulfilling the order and contract. The PO finance firm takes title to the rights in the purchase order, the inventory they have purchased on your behalf, and the receivable that is generated out of the sale. It's as simple as that.

When your customer pays per the terms of your contract with them the transaction is closed and the purchase order finance firm is paid in full, less their financing charge which is typically in the 2.5-3% per month range in Canada.

In certain cases financing inventory can be arranged purely on a separate basis, but as we have noted, the total sale cycle often relies on the order, the inventory and the receivable being collateralized to make this financing work.

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Purchase Order Finance PO Finance Financing Inventory Canada Purchase Order Financing 7 Park Avenue Financial