Forums: Discussions for entrepreneurs and small business.

Lisa:

There are two type of financing - Balance Sheet or Off Balance Sheet.

Bank loans are rely on your company asset and/or your personal asset and/or your credit score. Tranditional balance sheet financing.

We, however, provide Off Balance Sheet Financing, ie do not rely on that so much. But our financing only extends to transaction related to goods/products, not services, for we can`t determine if the service provider can perform. If it is product/merchandise Purchase Order, we then can lend against that.

In your case, I am afraid that we can not help. Supplying such contract to your banker certainly will help yet won`t be a decisive factor for them to make a loan.

I suggest you to talk to a banker on more details.

Good luck.

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We are a finance company that is specialized to help you to purchase by supplying PO Financing

ming@horizon.us.com

Lisa,

You will still have a problem since most banks are looking carefully at who they lend money to. If I was you, I would start banking with Credit Union or a small bank near your home. Larger banks are going to turn their back on you.

Based on your post, this start up funding approach is more applicable and limited to a business that is into retail sales.

Does it apply to any other type of business besides a retail business?

Purchase order financing can be used in any business to business application where one party sells it products subject to firm purchase orders. Businesses that use purchase order financing including manufacturers, distributors, retailers and service companies.

Roblue:

While Marshall`s description of PO is great, there are some little inaccuracies here.

First of all, PO Financing & Factoring are quite related financing types, but not necessary to have each other in one transaction. In our line of business, we can work with factors or elect to sit until your customers pay. Take-out is not a MUST. Some Factoring company provides "fake" PO Financing -- using factoring credit line to provide funding for your purchasing need. It does not give me more working capital although it helps you turn the capital around faster. We at Horizon, bring an extra credit line to you based the Purchase Order in hand, which is hardly to qulifiy as "asset" to borrow from conventional banking/financing.

Second, both PO financing and Factoring is not that high. Based on your PO quality or receivable quanlity, PO financing is quite normal to be around 3% per month and factoring can get to as low as 1%~1.5% a month.

Third, we have been financing importers, distributors and manufacturers. However, retailer and service provider are another breed. In the retailer and service provider part, We can`t be ensured that the product will be sold and service will be provided. Hardly I have seen any PO financing company lend against those.

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We are a finance company that is specialized to help you to purchase by supplying PO Financing

ming@horizon.us.com

Ming,

I almost always speak in terms of the "typical" cost or the "range" of cost for both PO financing and factoring.   Both will vary depending upon a variety of factors including, among other things, the type of goods, whether the goods to be financed are finished goods or work in progress, whether or not the company/borrower has a track record of success and is creditworthy, the volume of the transactions and advance rates. 

For well structured deals for finished goods with creditworthy parties all around, I`ve seen rates on PO financing even lower than 3%.  I`m currently working on a PO financing deal for which each contacted funding source has required an acceptable take-out.  A quick review of your website suggests that Horizon may have a similar requirement and also holds title to the goods until repaid by another lender.   If you can do a PO financing or LC financing without a committed take-out, please call me immediately.  Perhaps you can fund my deal which involves the import of raw materials from China.

By the way, Penagain is a perfect example of when PO financing has been used successfully in the retail environment.

As you pointed out for factoring, the costs can approach that of a bank line of credit for a borrower with significant monthly factoring volumes and a good balance sheet.  However, for the likely readers in this forum (startups and emerging growth companies with low monthly factoring volumes), I haven`t seen rates typically approach 1-1.5% per month. 

Regards.

Marshall

 

Marshall:

You are right on this point.

While I was speaking from our daily practice, you are giving SUN fellows an education on how it works. Most of our clients has more track record in business for years and has been supplying big chains like Wal Mart, Target, Costco, not to forget their PO are quite sizable (typical $500k per shipment).

On that basis, the PO financing fee and Factoring fee are much lower comparing to the situation that SUN people will have to face. I dont mean to mislead guys here, hopefully providing some real life referrece on how PO financing might look like in the upper range.

In fact, PO Financing is quite a non tranditional, flexible form of financing that may structure according need. All our cases are different from other another. We always sit down with our clients/prospects to find a solution to serve the purpose best.

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We are a finance company that is specialized to help you to purchase by supplying PO Financing

ming@horizon.us.com

Rob,

Just in case purchase order financing does not work for you, another start up funding resource that I have used is www.thesnaploan.com.

It works with start up business owners who have low credit score and no collateral.

They are pretty fast with the response to your application, at least they were in my case.

I would give them a try.