YOUR COMPANY IS LOOKING FOR P O FINANCE!
NEED TO BORROW MONEY TO FINANCE CONTACTS AND PURCHASE ORDERS?
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"The art of financial management is to balance risk and opportunity, and Purchase Order Finance Companies provide a canvas for businesses to paint their growth masterpiece." - Anonymous Financial Strategist
Unlock your business potential: Turn purchase orders into instant working capital!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Purchase Order Financing and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Purchase Order Financing - Canada
Purchase Order Financing in Canada. Here’s a shocker for you (not!) Generating sales revenue does not equal cash!
And if you’re in the contracts finance business, there’s an even longer lag than usual. Can this be addressed through another type of business loan? Yes, in many ways, both internally at your firm and externally through proper financing.
Selecting the right purchase order financing company is crucial for businesses needing funding to fulfill large orders. Before making a choice, evaluating the company's experience, financing process, and fees is important.
Let’s dig in.
CONTRACT WORK INVOLVES THE CHALLENGE OF WAITING FOR PAYMENT
If you’re fortunate enough to be in an ‘ all-cash ‘ business, your investment requirement in accounts receivable is… Nil.
Businesses selling on standard commercial credit typically have 30-day terms, and receivables tend to be collected within 30-60 days under a typical demand loan arrangement with a bank or commercial lender.
Businesses selling under contracts with clients find themselves in a unique position; they must pay for materials, wages, and other goods and services while waiting for payment under the terms of their longer contracts with clients.
That type of financing need is rarely covered off in a standard loan agreement.
The essence of contract finance revolves around ensuring you have a creditworthy customer and legitimate supplier.
As your firm completes work or services, you will typically be invoiced on a ‘ progress’ type basis. That, of course, allows your firm to eliminate significant waiting periods for payment of your billed accounts receivable. Your ability to finance the contract with an appropriate commercial lender allows you to take on business and work, knowing you will have cash flow along the way. A ‘ fee ‘ for the billed contract receivables to be financed is typically in the 2-3% range.
Having a valid purchase order is crucial to initiate funding quickly, enabling businesses to scale without limitations and assuring smooth order fulfillment with monitored quality.
To access proper contract finance, your customer must be creditworthy. Conventional bank financing and business credit lines are not really set up for facility contracts finance, so specialty financing is required. Your arrangements with your client must be clearly specified regarding work done and when payment is due.
CONTRACT FINANCING ALLOWS YOU TO CREATE ADDITIONAL REVENUES AND MEET CASH FLOW OBLIGATIONS
If proper contracts and contract financing are not implemented, businesses will be challenged to create additional revenues, let alone maintain their commitments to suppliers, banks, and commercial lenders.
Businesses with proper contracts with reputable clients are better positioned than they might think.
The trick is to ensure that your lender understands the nature of your payment structure and that your payment rights are properly assigned so that they can be financed.
This allows businesses to access capital, which supports them in managing their cash flow and inventory, increasing order sizes, investing in marketing, and covering transportation costs.
MONETIZE YOUR CONTRACTS
If done successfully, monetizing your contracts allows you to finance contracts properly and invest in more projects.
The key to proper contract financing is not necessarily your balance sheet—rather, it’s your credibility and expertise in completing and billing your contracts properly.
Meeting eligibility criteria is crucial for managing PO financing debt, and having a profit margin can significantly improve your chances of approval for purchase order financing.
4 REASONS WHY FIRMS NEED CONTRACT AND PURCHASE ORDER FINANCING
Typical reasons for contract/PO financing are as follows:
Your traditional lender/bank is unable to accommodate financing of this type
Suppliers insist on some level of prepayment.
Your company is turning down large contracts due to a lack of financing and an inability to pay suppliers on time or in advance.
Purchase order financing enables businesses to accept larger contracts and manage their cash flow effectively, covering up to 100% of the supplies needed for a project.
Additional debt and equity financing and loan agreements are either unavailable or undesirable.
2 METHODS OF FINANCING CONTRACTS AND PURCHASE ORDER FINANCING
Your firm’s invoices to your clients can be monetized directly into cash in one of two ways.
They can be cash-flowed with immediate funding via an asset-based line of credit, or suppliers can be paid directly via a PO FINANCE/SUPPLY CHAIN facility. Purchase order funding is crucial in covering production or inventory costs tied to customer purchase orders.
While the cost of financing and the interest rate on PO financing and contract financing are higher, financing allows your business to access cash and the amount of money due for work and products that have been supplied and delivered—many times under a milestone-type arrangement between your firm and the client.
3 KEY BENEFITS OF CONTRACT FINANCE
The benefits of a properly structured CONTRACT FINANCE facility are key.
They include:
Trade finance plays a crucial role in facilitating international trade and supply chain logistics, particularly for wholesalers and product resellers. Solutions like purchase order financing help businesses manage their supplier expenses and improve cash flow.
Vendor and Supplier Satisfaction
Ability to take on significant revenue projects not previously considered
Pricing power via supplier discounts
3 uncommon takes on Purchase Order Finance Companies:
- They can serve as strategic partners in supply chain optimization.
- They may indirectly contribute to job creation by enabling business expansion.
- They could potentially disrupt traditional banking models for business financing.
KEY TAKEAWAYS
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Leveraging purchase orders as collateral enables businesses to secure funding quickly.
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Financing companies typically advance a percentage of the order value, providing immediate working capital.
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This type of financing bridges the gap between order placement and customer payment.
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Businesses can take on larger orders without straining their existing resources or credit lines.
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Purchase order financing often involves direct payment to suppliers, ensuring timely order fulfillment.
CONCLUSION
Purchase Order Finance Companies revolutionize how businesses manage cash flow and growth opportunities.
Properly structured financing won't be prejudicial to the type of industry your firm is in.
Unfortunately, many firms find themselves out of favour when searching for traditional contract finance.
That shouldn’t be the case if done correctly. Sometimes, the easiest way to resolve contract funding is to simply have your client acknowledge that the work you have billed for has been performed/received. What could be easier than that?
In the technology industry, many contracts can also be financed under recurring revenue streams your firm bills - software as a service, long-term service contracts, etc. Accounting and legal advice on larger contracts are, of course, recommended.
The bottom line is don’t let the inability to finance contracts hinder your sales growth and financial progress.
If your works product or services require borrowing money or paying suppliers in advance, call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with contract payment financing solutions and avoid borrower defaults as you grow your business.
FAQ
How does purchase order financing benefit my business?
Purchase order financing allows you to accept larger orders without worrying about cash flow constraints, enabling rapid business growth and increased revenue opportunities.
Can purchase order financing help me compete with larger companies?
Yes, it levels the playing field by providing you with the necessary capital to fulfill large orders, allowing you to compete effectively with bigger competitors.
Will purchase order financing affect my existing credit lines?
No, it's typically separate from your traditional credit lines, preserving your borrowing capacity for other business needs.
How quickly can I access funds through purchase order financing?
Funds are often available within days of approval, allowing you to move quickly on time-sensitive opportunities.
Is purchase order financing suitable for seasonal businesses?
Absolutely, it's particularly beneficial for seasonal businesses as it provides flexibility to manage cash flow during peak demand periods.
What types of businesses typically use purchase order financing?
Purchase order financing is commonly used by manufacturers, wholesalers, distributors, and import/export businesses that receive large orders from creditworthy customers.
Are there any industry restrictions for purchase order financing?
While available across many industries, some finance companies may specialize in specific sectors or have restrictions on certain high-risk industries.
How does the repayment process work for purchase order financing?
Repayment usually occurs when your customer pays for the order, with the finance company deducting their fees before forwarding the remaining balance to you.
What documentation is typically required for purchase order financing?
Common requirements include the purchase order, your company's financial statements, and information about your customer's creditworthiness.
Can startups or new businesses qualify for purchase order financing?
While more established businesses may find it easier to qualify, some finance companies do work with startups, especially if they have strong purchase orders from reputable customers.
What criteria do Purchase Order Finance Companies use to evaluate funding requests?
Purchase Order Finance Companies typically assess your customers' creditworthiness, the viability of the purchase order, your business track record, and the profit margins on the order.
How do Purchase Order Finance Companies differ from traditional banks?
Purchase Order Finance Companies focus specifically on transaction-based financing, often providing more flexible and faster funding solutions than traditional banks, which typically require extensive credit history and collateral.
What are the potential drawbacks of using Purchase Order Finance Companies?
While Purchase Order Finance Companies offer valuable services, they may charge higher fees than traditional financing. Additionally, they usually require more oversight of your business operations and customer relationships.
