Recent Example Of An Approval On A Tough Funding Request

Recent Example Of An Approval On A Tough Funding Request

Blog articles discussing factoring companies, factoring loans, invoice factoring and all things related.

Many companies out there provide purchase order financing and each have their desired “sweet spot” when considering funding requests. While most companies will entertain your purchase order if you are receiving traditional order requests from tradition customers, few will grant credit on anything deviating front the norm. When I say traditional orders I mean orders taken from retail or wholesale customers. Traditional customers meaning customers with credit that is easily verifiable with a strong payment and financial history.

So what if your request isn’t “the norm?” We recently had such a request and found them the funding they needed.

Here’s the scenario: our client operated as a sandwich distributor supplying customers with home style sandwiches for schools and other municipalities. His business was growing and he needed purchase order financing to fill the orders. Easy enough right? Wrong. Because his products are perishable items, only one purchase order finance company would consider the request. You see, our client personally would go out, take an inventory of the sandwich supply and write down how much inventory had to be replaced. He would then take that purchase order that he created and submit it to his supplier to fulfill.

There are two issues for most lenders here: 1) perishable items, 2) the client creates his own purchase orders. Why are these an issue? Well, for a couple reasons. Firstly, most lenders are wary of lending to companies dealing with fresh perishable items largely due to spoilage. The spoilage risk could reduce the amount owed and thus create a risk to the lender’s exposure. Secondly, the client is creating his own purchase orders and receiving financing based on those orders. The lender is exposed here as the client could theoretically fabricate the amount of the purchase orders upward to assist the company’s cash flow. The lender would then advance on the amount of the purchase order and unbeknownst to them, be in an involuntary over advance.

So needless to say, most purchase order funding companies we deal with were not open to working with our client. Except one. You see, with a few more questions asked, we were able to get one of our lender’s comfortable. Regarding the sandwich spoilage, this is running at about 3% which is a nominal amount and well below the standard reserve taken in the formula advance. On the purchase order issue, our client receives a verification from the supplier on each purchase order and the sandwiches are closely monitored in a tracking system. Any excess sandwiches would not fit the amount being shown as used in the customer’s coolers. Additionally, our client’s warehouse is continually monitored by the USDA for quality and cleanliness reviews.

All this considered, the purchase order financing company was comfortable and granted the funding needed. Above and beyond the sandwiches, our client also distributes supplement drinks. This product line is a larger percent of the business and will be included in the collateral pool for the line of credit. All in the client needed $250,000 in immediate purchase order financing and has a backlog which should increase this substantially starting next month.

If your business could benefit from a lender that listens, we would like to speak to you.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966

Fueling The Economy, One Small Business At A Time!

Fueling The Economy, One Small Business At A Time!

Blog articles discussing factoring companies, factoring loans, invoice factoring and all things related.

2015 has started out with strong momentum. We are seeing more funding requests than ever before. The small business pulse is alive and well and these entrepreneurs need capital to hit their business goals. Below are some recent examples of how our purchase order financing and factoring company lending affiliates made some goals attainable:

$500,000 Purchase Order Financing and Factoring Facility
A young company in the apparel industry is experiencing some explosive growth. Their sales to date have largely been online and on credit card terms with their customers. However, when a large national retailer came knocking, both the size of the orders and payment terms changed.

The company was excited to earn some shelf space with the powerful retailer, but how would they fill the orders, deliver on time and meet the retailers expectations? The company is new and growing and doesn’t yet have the capital reserves to meet the cost of the purchase orders (in this case $500,000 over the next 12 months).

Huntington Coast Capital found them the answer with one of our purchase order financing and factoring companies. As a new company, they didn’t have the time in business or financial strength for bank financing. They needed someone that could act quickly and fund 100% of the cost to the supplier. We procured the right funding and delivered in the time they needed us to. Result – they were able to fulfill the order and have others waiting behind it.

$150,000 Government Loan for a Retail Ice Cream Shop
A retail ice cream shop came to us looking for capital to expand their operations. They used their own funds for tenant improvements to their location, but were looking for additional capital to hire more staff and advertise in local media outlets.

A retail ice cream store naturally would not be a target for factoring companies. We were able to get them qualified under the low cost SBA Express Program. This program is currently at 6% and tied to the Prime rate. The short story is that the company will be able to expand operations to meet demand and take their business to the next level.

$5,000,000 Purchase Order and Factoring Facility
A contractor with an existing business came across an opportunity to fulfill a large order for a government entity. The work order entailed the need for salt to be used in the removal of snow on the road ways. The good news was that they would be selected if they could come up with the wherewithal to deliver the goods. The bad news was that they had two to a max of three weeks to show that they had the funding to deliver or another vendor would be selected.

The company first went to their bank to ask for a line of credit to fulfill the order. The bank, based on the relationship they had for years with the client, was able to provide a $1,500,000 line to assist in fulfilling the order. The problem was they needed around $4,100,000 for the initial round and the bank’s offer was substantially inadequate for their needs.

They called Huntington Coast Capital. We quickly knew who the select lenders were for this request. After interviewing three potential funding partners, the company selected one and were able to meet the order. The goods will be fully delivered by the end of this month.

Could your business use some flexible funding to boost your production? Are you frustrated with the underwriting guidelines of traditional lenders? If so, we would like to assist! Please contact us to discuss the details of your request.

To Your Success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966