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Game-Changer for Canadian SMEs: The Power of Purchase Order Factoring!
Say Yes to Big Orders: Mastering P O Financing in Canada!
YOU ARE LOOKING FOR PURCHASE ORDER FINANCING
Revolutionize Your Cash Flow with PO Factoring in Canada!
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
WELCOME TO 7 PARK AVENUE FINANCIAL!
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
Or Email us with any questions on Canadian Business Financing
EMAIL - sprokop@7parkavenuefinancial.com
"Transform Your Business's Financial Landscape with Purchase Order Factoring in Canada."
"Unlock the Power of Your Orders: Finance Your Growth with Ease!"
Bridging the Cash Flow Gap: Canada's PO Factoring Strategy!
Introduction to Purchase Order Financing / The Challenge of Financing Big Contracts in Canada
P O financing via inventory financing and other asset-based lender solutions bring to mind the best and worst of running a business. It's the ultimate irony - Your worst business nightmare has just come true - you got the order and contract! Now what though?
Challenges of Financing Large Orders / Purchase Order Factoring: Navigating the Financial Maze
How can Canadian businesses survive financing adversity when your firm is unable to traditionally finance large new orders and ongoing growth? We've got some answers. Let's dig in.
Let's look at real-world examples of how our clients achieve business financing success, getting the type of financing needed to acquire new orders and the products to fulfill them.
Exploring Financing Options
Here's your best solution - call your banker and let him know you need immediate bulge financing that quadruples your current financing requirements because you have to satisfy new large orders. Ok... we'll give you time to pick yourself up off the chair and stop laughing.
Traditional Bank Financing vs. Alternative Options
Seriously though...we all know that the majority of small and medium-sized corporations in Canada can't access the business credit they need to solve the dilemma of acquiring and financing inventory to fulfill customer demand.
For companies with strong financials, a long history, and profits and cash flow now and in the past, there is no question that Canadian chartered banks fit the bill. But what about the thousands of companies in Canada that can't access all (or any?) of the traditional financing and great interest rates provided by the banks?
Purchase Order Financing as a Viable Solution / The Role of Independent Finance Firms
Bottom line - All is not lost. You can access purchase order financing through independent finance firms in Canada - you just need to get some assistance in navigating the minefield of whom, how, where, and when.
How PO Factoring Wo rks
Large new orders challenge your ability to satisfy them based on how your company is financed. That's why PO factoring via a PO financing company is a probable solution.
It's a transaction solution that can be one-time or ongoing, allowing you to finance purchase orders for large or sudden sales opportunities. Funds are used to finance the cost of buying or manufacturing inventory until you can generate products and invoice your clients.
Inventory Financing Lenders
Are inventory financing lenders the perfect solution for every firm? No financing ever is, but more often than not it will get you the cash flow and working capital you need.
Understanding the PO Factoring Process - How Does Purchase Order Financing Work
PO factoring is a very stand-alone and defined process. Let's examine how it works and how you can take advantage of it.
Customer Creditworthiness
The key aspect of such financing is a clean defined purchase order from your customer who must be a creditworthy type of customer. PO Factoring can be done with your Canadian customers, U.S. customers, or foreign customers.
Transaction Flow
PO financing has your supplier being paid in advance for the product you need. The inventory and receivables that come out of that transaction are collateralized by the finance firm.
When your invoice is generated, the invoice is financed, thereby clearing the transaction. So you have essentially had your inventory paid for, billed your product, and when your customer pays, the transaction is closed and the financing company deducts their fee - Mission accomplished.
The Cost of PO Factoring
P O factoring and inventory financing in Canada is a more expensive form of financing.
You need to demonstrate that you have solid gross margins that will absorb an additional 2-3% per month of financing costs. If your cost structure allows you to do that and you have good marketable product and goods orders, you're a perfect candidate for p o factoring from inventory financing lenders in Canada.
Combining Financing Options
We point out to our clients that Purchase Order / Contract financing can also be combined with a fully operational asset-based line of credit - this will often substantially lower the overall cost of your borrowing - it’s based on 2 key things which you probably already have - sales... and assets!
Conclusion
Don't want to navigate that maze by yourself? Speak to a trusted, credible, and experienced Canadian business financing advisor who can ensure you maximize the benefits of this growing and more popular business credit financing model.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is purchase order financing?
Purchase order financing is a financial service that provides businesses with the capital they need to fill customer orders when they lack sufficient funds to do so. This type of financing is particularly useful for companies that receive large orders but don't have enough cash on hand to purchase the necessary inventory or supplies to complete the order. Here's how it typically works:
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Receiving the Order: A business receives a large order from a customer but does not have the financial resources to fulfill it.
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Applying for Financing: The business applies for purchase order financing with a financing company. This involves submitting the purchase order and other financial details.
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Verification: The financing company verifies the legitimacy of the purchase order and assesses the creditworthiness of the customer (not the business applying for financing). This is crucial because the financing is extended based on the customer's ability to pay.
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Financing the Order: Once approved, the purchase order financing companies issue a letter of credit or provide direct payment to the supplier on behalf of the business. This enables the supplier to manufacture and deliver the goods needed to fulfill the customer's order.
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Delivery and Invoicing: The business delivers the order to its customer and issues an invoice.
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Repayment: The customer pays the invoice directly to the purchase order financing company. The financing company then deducts its fees and remits the remaining balance to the business.
The key benefit of purchase order financing is that it allows businesses to take on larger orders than they could otherwise handle due to cash flow limitations. It's particularly useful for small to medium-sized enterprises (SMEs) that have solid sales but limited working capital. This type of financing helps businesses grow without the need for traditional bank loans or equity financing.
How does PO Factoring benefit Canadian businesses?
It offers a quick cash infusion, enabling companies to manage large orders without traditional loan dependencies.
Who can use Purchase Order Factoring?
Any business facing cash flow issues due to large customer orders, especially those with creditworthy clients, can benefit when the financing company approves the order.
What are the costs associated with PO Factoring?
Costs vary but typically include a percentage of the invoice, reflecting the financing's short-term nature. You pay interest on the amount borrowed while it is outstanding.
Can PO Factoring improve my business's growth prospects?
Yes, it provides small business owners the necessary capital to accept larger orders and grow without the usual financial constraints.
What's the difference between PO Factoring and a bank loan?
PO Factoring offers faster funding based on customer orders, unlike bank loans and other small business loans which may require collateral and have longer approval times.
Is my business eligible for PO Factoring if it's new?
Yes, eligibility mainly depends on the creditworthiness of your customers, not the age of your business.
How quickly can I access funds through PO Factoring?
Funds fro PO financing companies are typically available within days, making it a swift solution for urgent financial needs.
Can I use PO Factoring for international orders?
Yes, PO Factoring can be used for both domestic and international customer orders.
How does PO Factoring handle customer payments?
Customers pay directly to the financier, who then deducts their fees before remitting the balance to your business.
Can PO Factoring be combined with other financing methods?
Yes, it can be strategically combined with other financing options, like asset-based lending and invoice financing/invoice factoring solutions for optimal financial management.
' Canadian Business Financing With The Intelligent Use Of Experience '
STAN PROKOP
7 Park Avenue Financial/Copyright/2024
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
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