Have you ever dreamed of that Big Sale? Sure you have; everyone that owns a company has. That is why you are in business to start with. But what will happen when you get that massive order? How will you be able to afford to deliver it? It is twice the size of your Operational Line of Credit.
That did happen to a Telecommunication Company in New York State, USA. In one order, their sales had increased to over 3 times the size of their entire Line of Credit at their bank. The owner went to the bank to get it increased so they could take on the order but the bank refused to increase their limit.
With this order, the customer had to have terms on the invoice of 30 days, and to make it worse the supplier required payment prior to shipping. The time to deliver the goods from the time it leaves the supplier dock is 10 days. In this case we have a 10 day delivery time plus a 30 day collection time from the customer, so we have a 40 time span of where we do not have the financial capacity to handle the order. So what now? Decline the order?
The owner of the company did speak with some Accounts Receivable Factoring Companies but they were not able to help out due to the time lag between the timing of the advance requirement and the delivery of the goods to the customer. They could not Factor the Accounts Receivable until the product was delivered, and they could not deliver the product until they received an advance to pay for the product.
The owner of the company spoke with a Professional Commercial Finance Broker who knew exactly what to do. He put together a Purchase Order Finance facility with a lender that specialized in the product that the company was selling. In a very short period of time, the financing was approved and the transaction was completed without an issue, and now the company was in the position to take any size order without the fear of not being able to afford to take the business. - 15246
That did happen to a Telecommunication Company in New York State, USA. In one order, their sales had increased to over 3 times the size of their entire Line of Credit at their bank. The owner went to the bank to get it increased so they could take on the order but the bank refused to increase their limit.
With this order, the customer had to have terms on the invoice of 30 days, and to make it worse the supplier required payment prior to shipping. The time to deliver the goods from the time it leaves the supplier dock is 10 days. In this case we have a 10 day delivery time plus a 30 day collection time from the customer, so we have a 40 time span of where we do not have the financial capacity to handle the order. So what now? Decline the order?
The owner of the company did speak with some Accounts Receivable Factoring Companies but they were not able to help out due to the time lag between the timing of the advance requirement and the delivery of the goods to the customer. They could not Factor the Accounts Receivable until the product was delivered, and they could not deliver the product until they received an advance to pay for the product.
The owner of the company spoke with a Professional Commercial Finance Broker who knew exactly what to do. He put together a Purchase Order Finance facility with a lender that specialized in the product that the company was selling. In a very short period of time, the financing was approved and the transaction was completed without an issue, and now the company was in the position to take any size order without the fear of not being able to afford to take the business. - 15246
About the Author:
Wade Henderson is a recognized Professional in Commercial Lending with over 14 years Experience in the Business Finance Field and a strong reputation for getting the deal done. Visit IMMFinancial.com to put his experience to work for you.. Accounts Receivable Factoring * Purchase Order Finance * Export Finance * Commercial Equipment Finance * Commercial Mortgage
