King Trade Capital Provides $1,200,000 Purchase Order Finance Facility

Friday, September 25, 2015

King Trade Capital provided a $1,200,000 purchase order finance facility to a New-York based importer (“Client”) of Christmas decorations.  The Client had a successful relationship with a large, nation-wide retailer and had been manufacturing and importing goods sold under a private label program for a number of years.

The Client imported goods from a single supplier in China that had been producing the same goods for 5 years.  Payment terms with the supplier had historically required an upfront deposit of 30% with the remaining 70% balance to be paid on open account terms after shipment and delivery to the retailer.  The Client sent a 30% deposit to the supplier, as they had in prior years, and the supplier started production for the upcoming holiday season.  As the supplier drew closer to completing production, they contacted the Client and indicated they would not ship the goods without payment in full or a payment guarantee for the remaining 70% balance prior to shipment. This demand was a direct result of pressures being placed on the supplier by their bank given the recent financial instability in the Chinese markets.  The last minute change in terms by the supplier put liquidity constraints on the Client and created an immediate capital need of $1,200,000.

The Client’s bank was unable to fulfill the needs due to the highly seasonal nature of the business and the fact they could not increase the credit facility in the timeframe required.  King Trade Capital was able to solve the company’s problem within a week of hearing from them.  King Trade Capital issued a letter of credit to the overseas supplier for the remaining balance, providing the supplier with the payment guarantee required by their bank.  King Trade Capital’s quick response allowed the Client to get goods shipped on time so delivery dates to the retailer would not be jeopardized.