What is Purchase Order Finance (PO Finance)?

Wednesday, December 16, 2015

Purchase order finance or PO finance is an invaluable solution to help grow a business’ sales and profit beyond the constraints of an asset based lender, factor or bank’s collateral base formulas.

King Trade Capital pioneered purchase order finance and offers the speed and expertise to offer the best finance solutions to help a company grow through fulfilling their contracts and orders. We are happy to do this to supplement a company’s current receivable and inventory financiers.

PO finance once was a form of financing that required a great deal of education to explain how it was done and the value it brings. Today most people understand the value of PO finance and how it offers a company additional capital in excess of their balance sheet, allowing the purchase of more inventory or goods to fulfill bigger orders than their balance sheet will support. Purchase order finance is performance risk financing unlike that of balance sheet lenders.

Purchase order financing is used not only for growth situations as a better, less expensive alternative to a company raising equity for a short term bridge or capital need to fulfill orders, but is frequently used as an effective tool in a company turnaround or restructuring. When balance sheet lenders can’t provide the needed liquidity PO finance helps to rehabilitate a company’s relationships and payment terms with their lenders and suppliers by helping provide a finance solution. The ability to deliver new profitable sales is crucial to any turnaround and rehabilitating impaired relationships.

Today if you look at almost any finance web site you would think purchase order finance has become main stream. The awareness of PO finance has grown from a specialized type of financing that was only provided by specialists that understand the risks and the value, to one that is marketed by almost every lender to help attract business. Most lenders advertising purchase order finance don’t actually offer a PO finance solution. In the current competitive lending environment lenders are doing anything they can to attract customers and rationalize deploying more assets. PO finance or what is often called trade finance has been added to the repertoire offered by many inexperienced lenders with unfortunate results for the clients and the lenders themselves.

The majority of non-purchase order and trade finance companies advertising or marketing purchase order finance don’t provide true PO finance or trade finance. They actually are interested in landing a customer for their typical AR and inventory financing and market PO finance as an added solution to win the business. However when a company is truly in need of upfront financing for a large PO, or large group of PO’s, they quickly find their finance facility inadequate as it only allows for small over advances on their current collateral and unfortunately does not provide the total liquidity or value that true purchase order finance from King Trade Capital offers. We can offer up to 100% of the cost of goods to fill orders and contracts when most traditional lenders only lend on receivables after goods ship and maybe offer 50% of the cost of inventory when it is in the client’s warehouse.

At King Trade Capital we have provided purchase order finance, PO finance, contract finance, trade finance, government contract finance, supply chain finance since 1992. We are experts in quickly providing finance solutions for businesses in need of capital to help manufacture or acquire inventory to fulfill contracts or orders. We offer financing for virtually every type of pre-shipment or pre-delivery finance need. We have offered our unique finance solutions in conjunction with almost every ABL or bank lender over the years and continue to do so.

We understand in order to offer the best PO finance solution as well as the best structure and liquidity we must be a specialist in what we do. Our financing is unique and specialized trade cycle financing that addresses the capital needs and the performance risk prior to delivery and traditional collateral being created. Once goods are manufactured and delivered we traditionally work in conjunction with our client’s factor, ABL or bank that will then advance on the receivables or inventory created, helping the company lower their cost of financing and providing them the best expertise and liquidity for each point of the delivery and payment cycle.  

King Trade Capital is the oldest and largest non-bank purchase order finance source in the United States offering small to medium sized companies in the US, UK and Canada the best purchase order, trade and government contract finance solutions. We can be contacted at 214-368-5100 or found online at  www.kingtradecapital.com