Tweet

Inventory and Purchase Order Financing Solutions for Canadian Firms

Guest post by: Stan Prokop

Article Overview: How Inventory and Purchase Order Financing Solves Cash Flow and Working Capital problems .Information on how inventory financing and purchase order ( P.O.) financing works in Canada . Why is this type of financing an alternative financing strategy that can grow your firms sales and profits .

Inventory and Purchase Order Financing Solutions for Canadian Firms

For many Canadian business owners growing sales and profits is not always the biggest challenge, it's locating business financing in Canada a can satisfy inventory and purchase order requirements from their customers.

When traditional financing doesn't necessarily satisfy your firm's ability maintain thee right levels of inventory, and satisfy those large new customer purchase orders and contracts than an inventory and P.O. Financing facility might just be the solution.

Clients we speak to like the concept but always ask - 'How does this type of financing facility work?' . We can use a basic example that reflects the power of this unique financing tool. Let's assume you have an order, contract, purchase order, etc from a valued new or existing client. The challenge, mainly due to the size and or timing of the order, is of course how you purchase and maintain the level of inventory to satisfy those client needs.

When you use an inventory or purchase order financing facility your vendors or suppliers are paid directly by the inventory financier. Generally speaking up to 75% of the value of your order can be financed via a payment to the supplier. That 75% number is key, because in the example we are using I reflects that you probably have at lease a 25% gross margin on the sale of your products. Generally speaking at least that amount of margin is required to efficiently and properly complete an inventory or financing transaction. That is because the remaining 25% acts as both a buffer to the lender, as well as it allows some of your margin to be paid out as a financing fee of course , for the business risk and cost to finance your inventory/project .

Generally inventory finance lenders prefer to be paid as soon as you ship and create a receivable for your goods and services. That necessitates ensuring that you have a receivable financing facility set up with either you bank or a receivable financing/discounting firm.

What is the key benefit of such an inventory or p.o. financing facility? It is simply to remove a huge part of what finance people call the conversion cycle. If you don't know the term we are very sure you know 'the feeling '. It is the feeling of knowing that in a normal environment, if you were fully financed, that you would be waiting anywhere from 60-90 days, (sometimes more, sometimes less) for a dollar of your services to move from time of receipt of purchase order, your purchasing the inventory, your finishing the inventory, and then billing and waiting another 30-60 days for payment. The inventory finance facility helps to significantly lesson that amount of time as you can imagine.

That is why growth and the ability to carry inventory, (and receivables) are often the biggest challenges to Canadian business owners who are focusing on increased sales and profits.

Inventory and purchase order financing focuses on the transaction, and focuses less on the fundamentals of your company. Naturally the facility works best when you can validate that your firm has strong management, good profit potential in your orders, and the ability to successfully deliver and get paid to clients who are generally known or credit worthy. Financing for clients who sell to the 'big box 'stores are commonplace in inventory and P.O. Financing - think 'Wal-Mart'.

Remember also that the financing facility we describe above delivers on working capital and cash flow, but is not a term loan per se, so no additional debt is on your balance sheet - you are simply monetizing your inventory, receivables, and purchase orders in order to complete our full ' conversion cycle' of order „³ inventory „³ Receivables„³ Cash .

When you can duplicate that process over and over and shorten the total time outstanding you have successfully utilized one of the most unique financing alternatives for Canadian business.

Speak to a trusted, credible and experienced advisor in this area if you have an inventory financing need. Ensure you understand timing, costs, how the facility works and whats required. You might find that it's the perfect solution for growth and profits.

Related Articles
  Inventory and Purchase Order Financing – Canadian Solutions
  Canada’s Ultimate Working Capital Combination Alternative Financing Solution -
  Purchase Order Financing Canada
  Inventory Financing & Purchase Order Financing in Canada
  Real World Lessons On Inventory Financing from Purchase Order To Cash
  Small Business and Medium Sized Business Inventory and Purchase Order Financing in Canada
  Inventory Financing – Canada - A unique financing challenge
  Business Inventory and Purchase Order Financing Canada
  Inventory Loans and Purchase Order Loans – How does Inventory Financing Work in Canada
  Staying Afloat via cash flow financing – Cash Flow for Business Solutions
  Guess Who’s financing inventory and using purchase order Finance ( P O finance) ? Only Your Competitors – that’s who !
  Inventory & Purchase Order Financing - Canada -
  Is Financing Inventory and Financing Purchase Orders Actually Possible In Canada ? Yes You Can!
  Are Inventory financing lenders and P O Factoring solutions your best business financing bet ?
  On Top Of The Latest Trends In Canadian Growth Financing? Working Capital & Purchase Order Finance Alternatives
  Inventory, Purchase Order, and Receivable Financing – Working Capital Solutions
  Sources of Financing for Working Capital Cash flow in Canada
  Purchase Order Financing Canada – A Great Canadian Alternative Financing Solution
  Purchase Order and Inventory Financing in Canada
  The Reality Around Working Capital And Cash Flow Business Financing In Canada

Article Tags: inventory financing, purchase order financing



Related Forum Posts
Seek Venture Capital & Funding - Hello, Greetings from India. I am Seeking Venture Capital for Offshore Software Company Start-up. Need advise along with Business Model Sample. I have a basic outline for an offshore company. 1. Technology - like Microsoft Dot Net, Java, LAMP 2. Talent Team - Found Good Technology Developers. 3. Where I can get the leads/potential customers - Leads have been identified who are willing to move forward offshore projects. 4. I do not have resources like funding. It is a very critical factor to me Industries: Manufacturing, Real Estate, Retail, Insurance, Distribution & Logistics, Healthcare, Industry Associations and Software Product Development, Agricultural Industries and Etc. Services: Offshore Software Development Company. Offices to be located: Hyderabad, Andhra Pradesh, India and USA. Products/Services/Applications in areas like POS & Billing, Sales & Distribution, Production Planning, Material Management, Inventory Control, Plant Maintenance, Purchasing, Accounting and Logistics. Dynamic Web Programming with Database Driven Content Management Systems, Online Stores for E-Commerce, B2B Solutions, Community Portals, Website Redesign and Development, Custom ERP with Enterprise Wide Functional Modules such as Marketing, CRM, Accounting, Inventory Control, Sales & Distribution, Production Planning, Purchase & Stores, Logistics and Supply Chain. Seek your further questions and help. Thank you, Best Regards, Jayapratap.
Re: Website Name Help - Its good that you have come up with the idea of setting up a website for your business. Now As it is into Business Solutions, I would recommend that you also include this into the name of the website. This will help you getting better results as far as SEO is concerned. You can start building a brand with this name. As you have already got the name booked, you can try changing it to something on the lines of Business Solutions as in azimabusiness or azimabusinesssolutions. Its a long name but still is good from the SEO point.
Help me name my moms business - I think Infinity Cleaning Services sounds better than Elite Cleaning Solutions... Why the Solutions? What is there to be solved? You simply get a rag with some Windex on it and wipe away.... plug the vacuum and Vac Away, get a mop and mop away. Stick to Infinity Cleaning Services... ICS sounds cool...
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Canadian Entrepreneurs...let's chat.... - I thought it would be nice to gather up all the Canadian entrepreneurs on one topic to discuss how everyone is getting along. I just realized Evan is Canadian as well! Hope he's able to join the conversation. Look forward to the chat. By the way, I'm in BC. Phil


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

9 tips to increase ROI in PPC Campaigns

How Promotional Caps became a Fashion Trend

3 Key Factors For Raising Capital

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.