28JanJanuary 28, 2022 By Patrick

5 Things You Should Know About Purchase Order Financing

Purchase order financing is widely used to cover the costs of materials, supplies and delivery expenses associated with various products and services. Huntington Coast Capital has been securing purchase order financing for clients since 2009.

Here are 5 things you should know about purchase order financing:

This financing is offered to cover the cost of goods associated with your sales.

Companies in most all industries have a cost of goods. There are raw materials needed for manufacturing operations, supplier payments required for wholesalers and inventory purchase needs for eCommerce and retail organizations to name a few. In the beginning, most companies finance their cost of goods internally with their startup capital which usually means their personal savings. If you are successful in your business, you will quickly outgrow your internal capital capacity and need to finance the increased cost associated with your sales. This is where purchase order financing plays a critical role in the growth of your business. Without purchase order financing, companies would be limited in how far they could take their business.

Banks do not offer this form of financing (unless you’re a large corporation and qualify to operate through a Letter of Credit).

For most business owners the first option is to speak with their bank when needing a “line of credit” for their business. The problem is that banks do not offer this form of financing for a number of reasons with the inherent risk in the financing being number one. The bank will offer a nominal line of credit, if at all, based on the financial strength of the business. Unless you’re a blue chip company that is well established, profitable and have a long history with your suppliers, you will not be getting any line of credit worth the time and effort.

Larger companies that meet the criteria can operate under a Letter of Credit which serves a similar purpose as purchase order financing, but is reserved for the top tier companies seeking credit.

Here Is A 30-Second Video Explaining How It Benefits Your Business

The cost is between 2.5% and 4% every 30 days on the money borrowed.

The cost you can expect when exploring your purchase order funding options is a monthly cost between 2.5% and 4% charged against the money borrowed every 30 days. For example, if you needed to borrow $100,000 to cover your supplier costs the finance expense would be between $2,500 and $4,000 for every 30-day period the line remains outstanding. If your margins are the typical 30% the sales price would be $130,000 to the customer and you would pay between $2,500 and $4,000 for the purchase order financing line. Your resulting gross profit would be $26,000 to $27,500 depending on the rates charged.

Keep in mind that while this may seem expensive, this represents a profit you would not normally realize without the financing in place. As a matter of fact, purchase order financing doesn’t cost you anything. You actually lose money by not using using it. This is especially true when the purchase order finance company is covering the entire cost of goods including any supplier deposits and shipping and logistics costs. In short, you’re playing with the house’s money as they say. Your margins and profit realized will be reduced, but still substantially better than the zero profit you would realize by not being able to deliver on the order.

Can work in conjunction with other forms of financing

Purchase order finance companies work nicely in conjunction with other forms of financing. In the majority of cases the business owners already have an existing line of credit. The line limit is not adequate to meet their growth needs and the bank has declined offering them further credit. Purchase order finance companies prefer that the company have access to additional credit as this provides further assurance that their line will be paid off.

Allows for unlimited growth of your business as long as the sales are supported by purchase orders from your customers.

As alluded to above, purchase order financing provides your company with the access to capital necessary for growth. Companies in all industries utilize purchase order financing in some shape or form. Firstly, there is the direct borrowing of capital as described in this article and then there is credit offered by suppliers (i.e. n30 terms with discounts for early payment) to support growth. However, the later example is becoming more rare as suppliers are in need of cash flow themselves and are requiring payment at the time of purchase.

Our clients experience the benefits of not having to worry about fulfilling orders. There is nothing worse for a company’s reputation than to promise delivery of a product and then not being able to deliver. When this happens the customer loses confidence and seldom return and offer a second chance. You have one chance to prove yourself. Don’t let lack of capital hold your business back!

Summary.

If your business could benefit from additional capital, explore the purchase order funding options available to you by contacting us at 844-239-2632 or online here. We look forward to providing your business with solutions and playing a part in the growth of your business!

If you would like to research further, here are some further resources regarding purchase order financing.

05Oct By Patrick

What Is The Cost Of Purchase Order Financing?

A common question we receive is, “what is the cost of purchase order financing?” Purchase order financing has been widely used to assist distributors, wholesalers, manufacturers and retailers in growing their business. Purchase order financing specifically covers the cost of goods required from suppliers. Examples are numerous but for example, if you own a spice business, you would need to pay suppliers that harvest and manufacture the spices along with the bottlers and shipping companies to get the finished product to your end customer.

Most businesses can self-fund the cost of their company’s capital needs internally when first starting out. However, if they are successful in their marketing efforts, they will eventually experience orders that outstrip their available cash flow. The goal of any company is to grow and become well-known in their space. More often than not, financing is required to make this happen.

What is the Cost of Purchase Order Financing?

In short, the cost of purchase order financing ranges from 2-3% for every 30-day period the loan remains outstanding. Some PO finance companies will cover 100% of the cost of goods including shipping costs and some will require a 20-30% cash contribution from the client company.

How do I know if the cost of purchase order financing is something I can afford without giving away all my profit?

The analysis required in assessing whether purchase order financing is right for you is different than the loans most people are used to applying for and have past experience with. Most of us have applied for or have a mortgage and/or an auto loan. These types of loans are largely commodity based financing whereby 100% of the focus is on the annual interest rate and monthly payment. These are the most widely used forms of installment loans.

Purchase order financing is a much different analysis. In reviewing this form of financing, we are looking at the opportunity cost of taking on outside financing to fund the growth of our business. We want to maintain our margins as much as we can while growing the business and scaling our products or services.

How to measure the cost of purchase order financing.

To keep the math simple, let’s say your company’s product has a 30% gross margin. You receive an order from a big customer that you have been pursuing for many months and the hard work has finally paid off with a sizeable order!

You need to pay your supplier $100,000 for which you will receive $130,000 from the customer once delivered. The total time from the customer order to receipt of the product is 60 days. The cost of the purchase order financing is 3% per 30 days.

A breakdown of the transaction would be as follows:

$100,000 borrowed
6% effective cost for 60 days (3% every 30 days)
$6,000 total financing cost ($100,000 multiplied by .06)
Customer pays $130,000 for the product
Total gross profit is $24,000 ($130,000 minus $106,000 which is the money borrower plus the fee for the capital)

The $24,000 profit would not be realized without financing the cost of the order. You are leveraging the cost 100% and earning profit with “other people’s money” as they say. This ratio would be the same whether there was just $10,000 or $1,000,000 borrowed.

So the question isn’t “what is the interest rate” but rather an opportunity cost analysis. Would you spend $6,000 to earn $24,000? Similarly, would you spend $600 to make $2,400 or $60,000 to make $240,000? Of course you would!

How does my company qualify for purchase order financing?

There are a couple of points the credit manager will consider before issuing an approval on a purchase order financing facility. In summary the areas of focus are:

The financial strength of the customer placing the order (i.e. if they are the requesting $130,000 worth of product be delivered before payment, are they financially strong enough to warrant the credit risk?).
The financial strength of your company as the borrower (can your company survive a delay in payment or complete loss on the order? Are there other customers you can sell the same product to in an emergency situation such as an order cancellation?)
Past track record of successful delivery to the customers and verification of the supplier efficiency in fulfilling the orders correctly with minimal disputes.
Your company’s time in business. While is not impossible to receive PO financing on your company’s very first orders, both the customers financial strength and your company’s starting capital would need to be strong.

These are just the four initial considerations underwriters take when reviewing a purchase order financing requests. Variables exist depending on the industry your company is in, typical payment terms in your industry, where your suppliers are located, among others.

How do I apply for purchase order financing?

If your company could benefit from this form of financing, we would like to speak with you. You can reach us at 844-239-2632. A brief 5-10 minute phone consultation can determine whether or not purchase order financing is a good fit for your business.

20AugAugust 20, 2021 By Patrick

Purchase Order Financing Versus Supply Chain Funding

Supply Chain Funding has been steadily growing in popularity with our clients. Supply Chain Finance programs provide the business owner with capital to cover the cost of goods and make supplier payments.

How does it work?

Finance companies offering this form of financing will look at the business owner’s equity in the business, profitability and growth projections to name a few areas of focus. The credit analysis is slightly different depending on the Supply Chain company you are speaking with. Some set the line amount at a percent of the equity in the business (i.e. 25% of the equity in the beginning raising to 50% over time), and others will base their credit limit decisions on the amount of insurance they can take out on the business, while some have a more subjective approach based on their review of the overall financial picture of the company.

How is Supply Chain Finance different than Purchase Order Financing?

When utilizing Purchase Order Financing, the business owner needs to provide a copy of the purchase order to the lender. The PO copy is the basis for the loan amount being requested and the lender’s collateral. PO finance companies are repaid at the time of delivery to the customer by the company’s factor or asset based loan provider (unless they are managing the total relationship). Purchase order financing is a good source of capital when looking to cover the cost of a specific order of finished goods.

Supply Chain Finance works a little differently. Under this arrangement, the lender will pay the company’s suppliers and then gives the company 30 to 120 days to pay them back through the normal course of business. This type of finance does not need to be specific to any one purchase order for the company. The lender becomes another vendor for the company on their account payable aging. This is a great alternative when the company needs to build inventory for their season or is an online or brick and mortar retailer selling directly to the consumer (no accounts receivable).

Which one is right for your business?

It depends on whether you have specific purchase orders to finance or if you need more of a general line of credit to pay suppliers. Both are great ways to enhance liquidity and each offer the business owner the ability to act with the confidence of a cash buyer. In fact, a good portion of the finance cost can be offset by taking discounts from suppliers for early payment. Utilizing these options are a great way to leverage your buying power and your company’s growth.

About Huntington Coast Capital.

Huntington Coast Capital secures funding for companies in a broad base of industries. Our clients come to us to find a more flexible lending partner to meet their growth needs. Many are declined by the bank and are in need of a more creative and entrepreneurial funding solution.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

Supply chain financing
Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
Lines of credit for working capital needs
Term loans for marketing, hiring staff and general expansion needs
Factoring services for accounts receivable financing that also provides for back office credit and collection functions
Purchase order financing
Asset based loans
Business acquisition financing
Inventory financing
Private commercial real estate bridge loans
SBA loans for business and real estate needs

Whether you are a startup or established, in need of $100,000 or $10,000,000 we have the capital partners to meet your needs. Contact us to see how we can assist in taking your business to the next level. To your success!

18JunJune 22, 2021 By Patrick

Purchase Order Financing and Working Capital – The Life Blood Of Business

Purchase Order Financing and Working Capital Are Critical For Growth!

Working capital is often described as the “life blood of business.” No matter the industry cash flow is critical to your company’s survival. Often times there is little cash flow left after meeting your fixed expenses, making your variable expenses difficult to meet. What are variable expenses? These are the expenses associated with sales efforts most typically. The most pressing of the variable expenses is “cost of goods sold” That requires purchase order financing. These are payments needed to pay suppliers to fulfill orders. It is impossible to grow if you do not have the discretionary income to meet growth opportunities. Outside financing is required in many cases. However, not all capital providers are the same and some can leave business owners feeling compelled to borrow at high interest rates or have restrictive convenants attached to the borrowed funds. There is a better way to find the perfect working capital solution for your business and we have the answers!

Is your business on the brink of breaking through to the next level? Is available cash holding you back from making additional sales and kicking more profit to the bottom line? We can help!

About Huntington Coast Capital.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

Supply chain financing
Equipment loans and lease programs learn more about our equipment loan platform offered through our subsidiary)
Lines of credit for working capital needs
Term loans for marketing, hiring staff and general expansion needs
Factoring services for accounts receivable financing that also provides for back office credit and collection functions
Purchase order financing
Asset based loans
Business acquisition financing
Inventory financing
Private commercial real estate bridge loans
SBA loans for business and real estate needs

Patrick Zazueta
Huntington Coast Capital, Inc.
Direct: 714-719-8966
patrick@huntingtoncoastcapital.com
www.huntingtoncoastcapital.comBRE License #: 02090967

31Mar By Patrick

Purchase Order Financing In California

Facilitating Business Growth Through Purchase Order and Supply Chain Financing

The barrier to growth for most all businesses, especially startup ventures, is cash flow. Banks will tell you that you need two years of profitability (as shown on your company tax returns) before they will consider providing a business loan. If you do manage to qualify for a bank loan, it will almost always be an SBA term loan (one lump sum loan amount usually secured by real estate). These loans do not address the ongoing working capital requirements business owners need to fund purchase orders and other monthly cash flow needs.

This lack of access to capital is the reason the majority of businesses fail within the first three years.

The capital partners we represent have an entrepreneurial approach to lending that opens the door for many to grow their business without the covenants and restrictions of traditional financing! Here are a few examples of recently funded deals:

$100,000 Supply Chain Funding Line for a CBD Industry client – a distributor with enormous growth potential needed the capital to fund purchase orders. The initial line provided is $100,000 and will grow as the company’s sales grow. Estimated monthly volume with the financing in place is between $600,000 to $800,000 in monthly gross revenue.
$2,500,000 Supply Chain Line for a Home Furnishings Importer/Distributor – an already established company needed additional capital to increase sales. The use of this supply chain line of credit will allow them to grow from $50,000,000 to $75,000,000 in annual gross revenue!
$4,000,000 Supply Chain and Factoring Line for an Importer of PPE products – a newly formed entity in the personal protective equipment space needed capital to purchase goods from overseas suppliers. The partners in the business had solid experience and strong relationships on both the supplier and buyer side. The line of credit will allow them to scale their business and meet buyer demand.

About Huntington Coast Capital.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

Supply chain financing
Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
Lines of credit for working capital needs
Term loans for marketing, hiring staff and general expansion needs
Factoring services for accounts receivable financing that also provides for back office credit and collection functions
Purchase order financing
A sset based loans
Business acquisition financing
Inventory financing
Private commercial real estate bridge loans
SBA loans for business and real estate needs

Patrick Zazueta
Huntington Coast Capital, Inc.
Direct: 714-719-8966
patrick@huntingtoncoastcapital.com
www.huntingtoncoastcapital.comBRE License #: 02090967

09MarMarch 9, 2021 By Patrick

The Process: Purchase Order Financing for Personal Protective Equipment

Could you benefit from purchase order financing for personal protective equipment? Do you have purchase orders from credit worthy customers for PPE Products? Is a lack of capital holding you back from expanding your PPE business? Do you have inventory in transit or a factory allocation? Huntington Coast Capital can help.

The global pandemic has driven the need for PPE Products of all kinds including but not limited to:

nitrile gloves
face masks
face shields
hand sanitizer
gowns
COVID testing products
and more…

Huntington Coast Capital secures funding for manufacturers and distributors of personal protective equipment products. Our capital partners provide inspection services to verify all supplier allocations through onsite inspections of factories and allocation holders. In addition to inspections, all documentation in a proposed transaction is analyzed for authenticity. These added services provide more than just a pocket book for purchase order financing. Complete credit management and collection of customer payments is also managed. This allows the client the freedom to facilitate orders with the confidence of knowing they are in partnership with a world class credit management, quality control and financing partner.

Purchase Order Financing for Personal Protective Equipment

The Process

Once the purchase order financing for PPE products is in place the lender follows these steps:

lender inspects all documentation involved in a transaction for authenticity (i.e. PO’s from end buyers, SGS reports, factory details, etc.)
once approved, the lender will pay the deposit to begin production directly to the factory
the lender pays the balance upon completion and inspection of the finished products
products are delivered by air or boat
products clear customs
the buyer is invoiced
the buyer inspects and accepts the goods and manages their logistics to the desired location (unless drop shipped)
the buyer either pays onsite or is granted terms for future payment (terms granted to credit worthy customers only)
the buyer makes their payment to the lenders lock box
the payment covers the amount advanced to the factory or allocation holder, the fund’s principle and all finance charges and fees
the cycle repeats

Items needed for preliminary underwriting of a purchase order financing request:

complete contact information for the buyer(s) if not listed on the purchase order
complete contact information for the factory(ies) and allocation holder(s)
business entity documents for the client’s entity (i.e. Articles of Incorporation, Organization, etc.)
resumes/bios on the owners in the entity
Huntington Coast application
account receivable and payable aging reports (if applicable)

These items will give the fund enough to begin with their preliminary review. If the initial review is satisfactory, further conversations are had to go over the details in more depth.

The Huntington Coast Capital Advantage:

Unlike other direct lenders in the space, we are unbiased in our solutions. Direct lenders involved in Purchase Order Financing for Personal Protective Equipment have one product to present and sell – their own. We are not beholden to any particular lender. This unique advantage has earned us a reputation for unbiased consultation and proven results. Put the power of our industry knowledge to work for you today!

About Huntington Coast Capital:

Established in 2009, Huntington Coast Capital has a seasoned tenure in the purchase order financing space. We have been assisting clients in traditional industries for over 10 years. When the COVID outbreak began back in early 2020 our focus shifted to purchase order financing for PPE products as the overwhelming majority of inquiries surrounded the space. In the past 12 months we have facilitated numerous transactions by bridging our PPE clients with the appropriate funding partner for their business.

09Mar By Patrick

Purchase Order Financing for CBD Products

Huntington Coast Capital acted as the placement agent for a purchase order financing request for a client in the CBD industry. The purchase order financing facility will greatly assist the company in expanding its market. The new supply chain financing will allow the company to expand their sales from $20,000 per month to more than $500,000 per month!

The CBD market has been on the rise in recent years. According to Global News Wire – The global CBD oil and CBD consumer health market size is expected to reach USD 123.2 billion by 2027, expanding at a CAGR of 25.6% over the forecast period.

Growing buyer awareness regarding various health benefits offered by cannabidiol (CBD) and increasing legalization of cannabidiol oil and infused products is contributing towards the adoption of cannabidiol as a consumer health product, thereby positively impacting the market growth. Furthermore, changing buyer perception and attitude towards hemp-derived cannabidiol-based products is further bolstering revenue growth over the forecast period (full article).

Huntington Coast Capital’s partners in the space facilitate the growth of many CBD wholesalers and distributors. They do this by providing the much needed supply chain financing and factoring services necessary to facilitate orders and meet demand.

Our client currently has domestic partners formed with distribution in Texas and a lab in Colorado. All products are tested and approved according to industry guidelines. Operations to this date have been internally financed and limited due to available cash on hand. Companies starting out in any industry typically start with their own money. If the company is successful, they quickly run out of their own resources and need to find a capital partner to continue to expand. This is the best problem a company can have, but stressful none-the-less.

Supply chain financing and purchase order financing (there are slight differences) meet this need by paying suppliers directly. By financing the cost of goods, our clients are able focus on building customer relations and not worry about the capacity to fill orders.

If your CBD business could benefit from purchase order financing, we would like to hear from you. Call us direct at 714-719-8966.

02FebFebruary 2, 2021 By Patrick

Invoice Factoring – More Than Financing

INVOICE FACTORING – MORE THAN JUST FINANCING

Invoice factoring is one of the oldest forms of financing available to business.

The purpose of invoice factoring is to speed up your company’s cash flow. By speeding up the cash flow, business owners can scale their sales by leveraging responsibly. However, invoice factoring is more than just financing.

Benefits Of The Factoring Agreement

In a factoring agreement, the client engages the factoring company as their credit and collections department. In a factoring contract, all accounts receivable are collected by the factor from the company’s customers. This collection function serves in conjunction with the credit management of the customer base. The factor approves the customer for credit by conducting industry background checks using management systems not available to business owners (think of this like a personal credit report, but only for business entities). The factor can see the customer’s history of payment and financial condition. There may also be an insurance policy taken out on the customer. This insurance policy provides an additional layer of protection for the lender and a sophisticated credit management system for the business owner.

Grow Your Business And Reduce Your Fixed Expenses At The Same Time

As your company grows, factoring contributes to the bottom line. Instead of hiring more staff to manage the credit and collection functions (or any staff for that matter), you can outsource these responsibilities to the factor. The cost of hiring new employees, medical benefits, paid time off, investment and savings programs, etc. are all eliminated when using a factoring company.

The Factoring Advantage

Invoice factoring provides the client with financing to grow the business while at the same time managing the credit risk associated with that growth. Factoring companies have more resources available to them than the average business owner. The factor becomes a partner to their business versus simply an outside financier.

Could your company use invoice factoring to grow? If so, we would like to speak with you!

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

15Dec By Patrick

Purchase Order Financing For Nitrile Gloves

PPE Update: Huntington Coast Capital is close to verifying new production allocations of nitrile gloves through several different suppliers. Once confirmed, these orders will be eligible for purchase order financing for nitrile gloves. The goods will be delivered to directly to the buyer’s location or a designated warehouse where they can be inspected prior to buyer payment.

Huntington Coast Capital is proud to serve the nationwide community of first responders, heathcare providers, governmental agencies and police and firefighters. If you have clients in need of purchase order financing for nitrile gloves, we would like to speak with you.

Our core business in traditional industries is still very much intact. We advise on a wide range of funding options throughout the United States in the following areas:

Supply chain financing
Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
Lines of credit for working capital needs
Term loans for marketing, hiring staff and general expansion needs
Factoring services for accounts receivable financing that also provides for back office credit and collection functions
Purchase order financing
Asset based loans
Business acquisition financing
Inventory financing
Private commercial real estate bridge loans
SBA loans for business and real estate needs

Patrick Zazueta
Huntington Coast Capital, Inc.
Direct: 714-719-8966
patrick@huntingtoncoastcapital.com
www.huntingtoncoastcapital.comBRE License #: 02090967

18JulJuly 18, 2020 By Patrick

Where to buy PPE Products in large quantities

Huntington Coast Capital has access to PPE Products. If you’re looking to know where to buy PPE products in large quantities, give us a call, 714-719-8966.

Inventory cost, quantities and delivery schedules vary, so please inquire to get the latest details. We can support sourcing PPE products in large quantities. Access to the following inventory is available for either spot buys or production run orders:

N95: all masks on CDC list / NIOSH certified

3M 1860 surgical (from authorized distributor)

3M 8210 – multiple brands available

KN95: all masks on FDA current list. Several brands as available

3-ply masks: several brands available

Nitrile gloves: (4ml and 6ml)

Regular shipments supporting continuing orders from China

Regular shipments from Vietnam / Malaysia / Thailand (soon)

Gowns: isolation (level 1 – 4) – Non sterile, Sterile, Medical / Surgical, Waterproof

Covid 19 antibody test (South Korea)

Quick delivery of PPE products is available through domestic suppliers.

Are you looking for where to buy PPE products in large quatities? Contact us to discuss. For example, we recently had a client looking for where to buy PPE products in large quantities. This particular client wanted to start with an order of 10MM 3M N95 masks and then ramp up to larger quantities. The first 10MM needed to be on the ground and inspected prior to purchase. From there, items would be ordered on a production schedule and delivered as available.

We solved the client’s request by locating the 3M N95 masks in standing inventory and shipped it to a local warehouse for inspection.

Call us direct at 714-719-8966 to discuss your PPE Product needs!