| When you get a purchase order and don't have the | | | | between the day you receive the purchase |
| money to get the inventory or | | | | order and the day the order is delivered and the day |
| parts to fill the order, what do you do? You factor | | | | the invoice is then paid. If it |
| your receivables, right? Not if you | | | | takes 6 months to get the order produced and |
| don't have enough receivables right now. You would | | | | delivered and another 3 months for |
| get a loan or line of credit, | | | | your customer to pay, it will be more expensive than |
| wouldn't you?What if you don't have enough business | | | | a turn around time of 2 |
| history or enough credit or enough assets | | | | months and 45 days to be paid. In that case, you |
| to get the loan? The next solution might be to use | | | | better have a higher profit margin.The most important |
| your credit cards.What if this order is too big for your | | | | thing to do is look at all possible solutions when you get |
| credit cards or you don't have credit cards? | | | | an |
| Even though this order would help your business grow | | | | order you know you can't fill easily. Don't give up and |
| substantially and put you on | | | | refuse the order because you |
| the road to success, you might have to refuse it, | | | | don't have enough money to deliver. Factoring has |
| right?Wrong! If your customer who sent you the | | | | been around for thousands of |
| purchase order is credit worthy and your | | | | years, it is safe, quite inexpensive and will help your |
| supplier who will produce your order has a history of | | | | business grow.Talk to your broker and see what he or |
| producing quality goods on | | | | she can do for you, there are solutions to |
| time, you can probably get purchase order financing. | | | | almost all problems. Sometimes a Letter of |
| This is sometimes called | | | | Assurance or a 3-party Agreement can |
| purchase order factoring.The purchase order funder | | | | be drawn up which gives your supplier a guarantee |
| advances money to pay for the inventory or issues a | | | | that they will be paid out of the |
| Letter of Credit and the supplier sends you the goods. | | | | factoring proceeds. Then instead of requiring payment |
| You deliver the order to your | | | | on or before delivery |
| customer, generate an invoice and then a factoring | | | | (because you are not credit worthy yet), they will give |
| company pays you an advance | | | | liberal terms because your |
| on the invoice. The first thing that gets paid is the | | | | factoring company is paying them. If you can do it this |
| purchase order funding company.You get the rest of | | | | way, you may not need the |
| this advance for operating capital and get the rest of | | | | purchase order funder at all and will only have one set |
| the invoice | | | | of fees -- more than straight |
| amount when your customer pays the invoice. A | | | | factoring but less than both fees with the two-step |
| small fee is paid out of that amount | | | | process I described.A good broker will be working with |
| to the factor.So, you see, this is a two-step process. | | | | many financial companies that all do different |
| You work with the purchase order funder | | | | things and when one solution doesn't work, will try |
| and also a factor, since the purchase order funder | | | | another. So keep trying, don't |
| gets their money when the | | | | automatically refuse that new order.Donna Poisl is |
| purchase order is filled (when your customer receives | | | | President of Creative Funding Solutions. CFS works |
| the order).As you can imagine, this is a bit more | | | | closely with |
| expensive than just factoring, since both | | | | several of the best factors and p.o. funders in the |
| companies will charge a small fee. Your profit margin | | | | country, each with different rates, |
| should be at least 20% and | | | | fees and requirements and is able to find the best |
| preferably more for everyone to make a little bit of | | | | one for each client. |
| money.There should also be a fairly short time | | | | |