Purchase Order Financing - LC Alternative Funding
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Purchase Order Financing

An Advanced Solution for Advance Payment Challenges

Supplier payment requirements can be a major issue for companies that have little or no equity to work with. It is not uncommon for suppliers to demand payment in full at the point of shipment. They may even demand a guarantee of that payment (i.e. letter of credit) before they will start producing your product.

You may have a substantial order book, but if you have to pay for the product in advance, you’ll be financing those sales from shipping through to storage and customer delivery.

This can create a serious working capital gap as you wait for the cash to come in – and you still have to manage the ongoing costs of running a business.When your DSO (days sales outstanding) is 60-90 days, but your DPO (days payable outstanding) is zero, you will have little chance of realizing opportunities that depend on advance payment to suppliers – even ones that have been secured in most other respects.

 

PO Financing – Your POs can pay off.

For companies receiving finished goods from their suppliers, Liquid Capital’s Purchase Order (PO) financing solution helps you meet supplier requirements and bridge the sometimes extensive gap between when a product is ordered and when a customer receives and pays for it.

 

And it’s all based on the quality of your POs. If you have a PO out to a supplier, Liquid Capital can provide a letter of credit the supplier can draw on for payment – pending an inspection of the goods for quality and quantity at the point of shipping – essentially financing up to 100% of the cost of the product until it is in the customer’s hands.

 

Typically, PO financing works in combination with Liquid Capital’s Accounts Receivable factoring solution, which kicks in once the actual sale to the customer becomes final. Factoring provides you with working capital financing based on the value of your accounts receivable and is used to pay off your PO financing obligation.

 

PO financing funds supplier requirements and goods in transit; factoring then finances accounts receivable to pay out the PO financing debt.

 

We assume, manage and collect the financed debts, as well as provide clear, accessible reporting to keep you up to date on the process.

FACTORING PROVIDES CLIENTS WITH 80% OR MORE OF THE VALUE OF CREDIT-WORTHY INVOICES. THESE FUNDS CAN BE USED TO FINANCE WORKING CAPITAL REQUIREMENTS.

PO Financing

6 Steps
You receive a PO from your customer

You place a PO with your supplier

Liquid Capital provides your supplier with a letter of credit

Your supplier produces the goods and receives payment

The goods are shipped to your customer and an invoice is generated

The invoice is factored and the PO financing facility is repaid to Liquid Capital