Factoring Trade Finance: Are Inventory Financing Lenders and P O Factoring Solutions Your Best Business Financing Bet?

4/1/19

Are Inventory Financing Lenders and P O Factoring Solutions Your Best Business Financing Bet?

Your worst business nightmare has just come true - you get orders and contracts! What now? How can Canadian businesses survive financial difficulties when your company cannot traditionally finance large new orders and sustainable growth?

The answer is factoring and the ability to access lenders financing inventory when you need it! Let's look at real-world examples of how our clients achieve business financing success, get the kind of financing needs to get new orders and products to fulfill them.

Loans or Advances to Inventories
Loans or Advances to Inventories

Here is your best solution - contact your banker and let him know that you need to bend financing immediately to double your current financing requirements because you have to fulfill new large orders. Okay ... we will give you time to lift yourself up from the chair and stop laughing.

Even though it's serious ... we all know that most small and medium-sized companies in Canada cannot access the business credit they need to resolve dilemmas in acquiring and financing inventory to meet customer demand.

So everything is gone - obviously not. You can access purchase order financing through independent financial companies in Canada - you only need to get help navigating whose minefield, how, where and when.

New large orders challenge your ability to satisfy them based on how your company is financed. That's why factoring is a possible solution. This is a transaction solution that can be once or continuously, allowing you to finance purchase orders for large or sudden sales opportunities. Funds are used to finance the costs of purchasing or making inventory until you can produce products and collect your clients.

Is the lender financing the perfect solution for every company? There is no financing ever, but more often than not it will give you the cash flow and working capital you need.

P factoring is a very stand-alone and defined process. Let's examine how it works and how you can use it.

The main aspects of the financing are the net purchase orders that are determined from your customers who must be creditworthy type customers. Charter factoring can be done with your Canadian customers, U.S. customers, or foreign customers.

PO financing requires your supplier to be paid in advance for the product you need. Inventories and receivables generated from these transactions are guaranteed by financial companies. When your invoice is generated an invoice is financed, so that clears the transaction. So basically you already have your inventory paid, your product billed, and when your customer pays, the transaction is closed.

Factoring and inventory financing in Canada is one of the more expensive forms of financing. You must show that you have a solid gross margin that will absorb an additional 2-3% of the financial cost per month. If your cost structure allows you to do that and you have a good product and good order, you are the right candidate to take factoring from an inventory finance lender in Canada.

Don't want to navigate the labyrinth itself? Talk to a trusted, credible and experienced Canadian business finance advisor who can ensure you maximize the benefits of this increasingly popular business credit financing model.

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