Landing a contract with a big chain can mean a big boost to your business. However, as a supplier of pet goods, auto parts, or other consumer products, you may not have access to the capital you need to deliver the finished goods your new customer just ordered. Many distributors and suppliers do not have readily available lines of credit to provide advance payments required by offshore manufacturers. Most banks will not lend money against a purchase order because of the performance risk associated with the delivery of the products. If they advance funds and you don’t deliver the goods there could be an issue with paying back the bank.
When Financing Options are Limited If you are like most distributors and suppliers, having a 150 trade cycle which includes the time to order, receive and distribute the goods and then wait for payment is nearly impossible if you are going to continue to seek new contracts or if God forbid your product sell through and they reorder. You need working capital to pay employees, have working capital to provide order or manufacture, and pay those bills which are necessary to keep operating. In some instances, you may need additional equipment or staff to meet a large contract. This is when finding someone who is willing to provide suppliers funding, or distributors funding becomes even more important.