Due to a very large customer order, I may need a purchase order financing arrangement since the inventory will be in excess of my line of credit. This need will be in excess of $5 million. If you have experience with this type of transaction, please provide any and all feedback. I'd also like to know the rates and terms I can expect.
I may have a need for a Purchase Order Financing arrangement due to a very large customer order. Any recommendations?
Answers
You'll have to do your due diligence. Contact me and I'll give you some names to contact.
Check with your bank. Origination fees can be significant, but you should be able to get to a reasonable mark with them. Say, $10K for the origination of the line and then a moderate interest rate thereafter (prime+ 5%? depends on your relationship). Getting this quote can help balance the commercial lenders, and make sure they are competitive.
Normally, a company should have a relationship with a bank and has set up a Line of Credit with that bank. Lines of Credit are intended to finance special short-term transactions and financial needs, and a need to finance a Purchase Order would be one of these needs. If you need a Letter of Credit to back up an offshore PO, for instance, you need a Credit Line with a bank to back up a Letter of Credit -- it will draw down your available Credit Line.
Alternatively, there are specialty financing organizations that can handle specific needs, and one organization that specifically has Purchase Order Financing is a organization called Liquid Capital. This financing organization has franchise owned companies in various cities, and they certainly have one here in Scottsdale, Arizona. They offer Receivables factoring and other specialty financing arrangements, and PO financing is one of their specialty forms of financing.
There is a company out of Walnut Creek, CA that I have used in the past, Marble Bridge Funding Group. A good group of people and willing to work with you in non-standard situations. Rates are high (e.g. 2.5% for 15 days on PO factoring, 1/2 that for invoicing factoring), but you will get cash immediately after verification. Shoot me an e-mail if you want contact info. -Paul
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