Become a Valued Supplier Through Capstone’s Purchase Order And Trade Finance Programs
Being a valued supplier or contract manufacturer for customers today requires a lot more than just the best price, quality, and on-time delivery. Customers want suppliers and manufacturers that can be a seamless part of their supply chain, and partner with them to grow their business. This means that if you want to win new business and grow volume with your existing customers, you will need to be able to:
- Diversify product offerings and increase availability.
- Create flexible credit terms for customers.
- Accept larger orders and make more frequent bids.
- Reduce procurement times and accelerate shipping.
- Offer logistics and warehousing operations to support customer requirements.
- Participate in product and packaging design to achieve customer cost and quality goals.
- Support customer growth plans and meet unanticipated spikes in demand.
- Maintain a reputation as a business worth continuing to work with.
Having the financial resources to win new business and support existing customer requirements is a significant challenge for many companies. The pandemic sapped the financial strength of many suppliers and contract manufacturers. It reduced the working capital needed to maintain adequate levels of inventory for normal business volume, and finance new business opportunities and spikes in demand.
Finding Working Capital
Finding the working capital financing to take advantage of business opportunities as the economy recovers has been a problem for many companies because of their weakened financial position and the ‘risk-averse’ mode of banks. Lending to many small and medium-sized businesses is restricted even when they have firm POs for future business.
Fortunately, there are alternative financial solutions to help you become a more valued supplier. Purchase order and trade finance programs can provide the working capital you need to grow with your customers and win new business.
Purchase Order (PO) Financing
PO financing gives you the ability to obtain the inventory needed to support current customer requirements, spikes in demand, and capture new business. Unlike bank financing where the focus is on your collateral, financial statements, and credit rating, PO financing relies on the future business a customer order represents and the financial strength of your customer.
The way PO financing usually works is your financing source reviews your customer’s credit, accepts your PO, approves your purchase order loan, and makes payment directly to your supplier. Once your supplier receives payment, they will begin working on fulfilling the order. After the goods are shipped and your customer receives the order, you’ll send an invoice to your customer. Payment for the account receivable is made by the customer directly to your financing source, not you. Your profit is paid to you after payment is received, closing the transaction.
PO financing is easy, immediate, and flexible. It has a number of advantages for your company including:
- Faster and easier to obtain than bank financing.
- No need to tie up your assets as collateral for a loan.
- The credit decision is based on your customer’s financial strength, not your company’s credit rating.
- Combining with a factoring program reduces trade cycle funding gaps so you receive cash quicker.
- Expands your working capital financing so you can support current customers and gain new business.
- Allows you to accept large orders without using up the cash needed for operations, or avoid borrowing against the bank line of credit you need to backstop operating cash flow.
- Increases ability to be more competitive in the marketplace.
- Leverage additional volume to negotiate better pricing and terms from your vendors/ suppliers.
Trade Financing
Trade financing utilizes PO financing for international transactions. It can help you obtain financing to support existing customers, gain new business, and finance surges in order volume.
Sometimes, the best deal on supplies or the particular product simply cannot be found domestically. Many small and medium-sized companies can be deterred from looking for suppliers abroad due to the paperwork and jargon used in international transactions. Ultimately they end up foregoing business opportunities. Trade finance simplifies the process, especially if the financing source, such as Capstone, has extensive experience in international transactions.
Trade financing typically includes the importer (you) obtaining a Letter of Credit (LC) from your financing source. An LC is a payment instrument with the main purpose of mitigating risk associated with international trade for both importers and exporters. The LC also protects you against non-performance by the foreign supplier, because payment is not made until all terms of the LC have been met, the product meets desired specs, and the product is shipped. In short, a LC assures payment and contract obligations.
A factoring agreement between you and your financing source closes out the loop on the transaction. When you ship to your customer and send them the invoice, the customer pays your financing source directly. Your profit is paid to you after payment is received. An easy, fast, and flexible solution.
Trade financing has all the benefits of PO financing structured to facilitate international transactions. It gives your company the ability to do business around the world without tying up your working capital or using your bank line of credit. Trade financing reduces trade cycle funding gaps and improves cash flow.
Capstone’s PO and Trade Finance Programs
Capstone recognizes that every business operates under different circumstances and can tailor a program to fit your needs. Capstone’s PO financing and trade financing programs provide businesses with access to flexible financing and logistics solutions through Capstone’s network of buyers, wholesalers, and distributors. Capstone can partner with you to provide the working capital you need to grow your business internationally and domestically and be a more valued supplier.
If you would like to discuss PO and trade finance programs with a Capstone representative, please call (212) 755-3636.
