Finance

Update Your Computer System With Bad Credit Computer Financing

2012-01-01T08:32:00.000-08:00

The moment I placed myself in front of the computer screen a whole new world beckoned me to join it. And years of strolling have proved incompetent to get me acquainted with the full panorama of computers. You have always wanted one in your home. But something is stopping you. Bad credit? Do I hear bad credit? You think bad credit can stop you from getting your computer financed. Which world are you living in? You certainly need a computer. Computer financing for bad credit can enable you to get your very own home computer, lab tops, desk top or any other computer requirement.

Credit can be marred at any stage due to a number of reasons. Late payments, inflating debts, bankruptcy, county court judgments, arrears, any court case - all can result in impaired credit. Jaundiced credit report can falter you probability for getting computer financing. Yet the odds are not that diffuse for bad credit computer financing. First of all realize that computer financing for bad credit is not a Gordian knot. Any person with bad credit can find a loan including the one for computer financing. Envision your own position before you make a loan application for bad credit computer financing.

Bad credit has some obvious disadvantages that cannot be ignored. Bad credit is synonymous with greater rate of interest. You can't escape increasing rate of interest for bad credit computer financing. What you can do is shop for a comparative lower rate of interest. First make your own stand clear with respect to bad credit loan. Before you make your claim as a bad credit loan applicant, check out your credit status. This will canonize your computer financing for bad credit with little or no impediment.

Very few people actually understand the meaning of the terms credit report and credit score. These are integral to bad credit loans inclusive of computer financing. A credit report contains a list of any credit cards you may hold, loans you may have taken out, how much your monthly payments are and any actions taken against you for any unpaid bills you may have accumulated over the years. Before providing you with finance for your computer, the loan lender will probably check your credit activities, to rule out any bad credit details. Credit score will be extracted out of your credit report. Your credit score is not good, that you already know. Otherwise you would not have been reading this article. Knowing your credit score will facilitate the prevention of abuse at the hands of the loan lender. He might take advantage of your ignorance and charge you higher rate than valid in context to bad credit computer financing. Forewarned is forearmed. You have heard that.

Now hear this, it really works.

Another term that directly connects with bad credit is no credit. 'No credit computer financing' is not similar to 'bad credit computer financing'. Bad credit computer financing entails that at least you have installed credit through a bank account or credit card company. In the no credit specimen, no credit you have never owned a credit card or ever inaugurated a bank account. This is altogether an entirely different struggle. Some argue that it is better to have no credit instead of bad credit while contemplating computer financing. But the fact is, in order to establish yourself as a reliable borrower you at least need to have credit. And this can't be done unless you establish a credit.

The facilities that come with bad credit computer financing are a conscientious recompense. The loan lenders are increasingly being innovative with bad credit computer financing products. Computer financing for bad credit permits you to purchase a computer instrument that comes with a full 2-year replacement warranty on parts and service. Also, all machines come with 1-year toll-free tech support. The loan lenders have notebooks and desktops, so that you can choose the machine you want. AMD powered machines that provide the latest processing speeds are also available as bad credit computer financing options. You can avail the latest software programmes through bad credit computer financing. Bad credit computer financing can release new possibilities for students. Computers are indispensable in relation to education.

All said and done - I must tell you that even the loan lenders realize that sometimes things go wrong and can lead to bad credit situation. Financial setbacks can undoubtedly affect your life unexpectedly. Therefore the essence of finding a bad credit computer financing is finding a loan lender that is ready to work for you. Bad credit computer financing can get you not only a powerful highly sophisticated computer system. Not only that the added ascendancy is the building up of positive payment history.
Your computer has waited in vain for retirement. But what could you do, you yourself were groping due to bad credit. This time oblige him with a well deserved annulment of services. And compliment your own specialization with state of the art computer system. This season reboot your computer system with bad credit computer financing.

UK Finance for Business

2012-01-01T08:31:00.000-08:00

Running a business and becoming successful in that venture requires a lot finance and financial assistance. In UK finance for business can be got from different sources. Business related financial services are provided by many organizations in that field. UK finance for leasing a company or organization, UK finance for debt collection, UK finance for Venture Capital can also be arranged.

There are companies that help a business in hire purchasing and arranging for leasing. You can approach such dedicated companies for such services. UK Finance for hardware funding for the information technology business is also available in companies. Leasing services for small businesses, agricultural and industrial funding operations are available in companies dedicated to that service. A company called Richard Mares Asset Finance in UK finances for agricultural and industrial setups. If you need information on UK finance for equipment leasing, mortgages and commercial finance then you can approach companies like 1st Leasing Company and 1pm.co.uk. Many options for UK finance are available with them. Just check out their website for more details on the different types of finance available with them. For UK finance from £5,000 upwards you can approach companies like 1pm. They work closely with their clients to provide what they need.

UK Finance for companies in the information technology sector can get their financing options from companies like Corporate Computer Lease Plc in UK. Such companies make IT more affordable and you get the UK finance for almost any technology spends. They have successful records of financing in UK for even Fortune 500 companies. This is one of the fastest growing UK finance companies.

Companies like Corporate Business Finance fund you for Plant, Machinery and for other corporate financial services. They provide finance in UK for many services like hire purchase, leasing, operating leases, factoring, release of capital, and commercial mortgages. Each and every business may need a unique funding requirement and it is a tedious task to arrange for funding when you need to run your business. A lot of time is wasted in searching for proper funding. Under such circumstances you can approach companies like these for UK finance for your funding requirements.

For new start ups it is difficult to get finance in UK or elsewhere. Most of the finance companies will fund only the established businesses. But companies like Oak Leasing help even the start ups since they understand the difficulties that the startups face. The problems that the start ups face are only initially. If they have a proper business plan they could come up. The team at Oak leasing would finance your startups and for any new equipments that you need. More details are available in their website.

There are companies that fund only the big companies. Finance for big companies is given by UK finance companies like the Benington Securities. It is a private enterprise brokerage. They cover only the corporate investments. There are many companies that provide UK finance for even individuals. Companies like Troman finance provide funds for the individuals and small business firms.

BangYouLater.com – Great Place for Tube Porn Lovers

2011-12-29T06:35:00.000-08:00

Various videos that contain elements of porn are one of the videos that are sought at various sites on the Internet. With the sophistication of information and communication technology, people can easily find various websites that provide a variety of porn videos. However, not all sites on the Internet can provide satisfactory services and facilities for visitors. Bang You Later is one of the largest and most reputable sites that provide a variety of free porn videos. The site could be very good option for tube porn lovers. Models who played in the video is also very diverse both amateur models and porn stars who are famous in the world.

Some lovers of porn movies usually have several idols. They also find a variety of film or video being played by their porn stars. To find a variety of pornstars movies is also not difficult because BangYouLater available in many adult films played by a variety of world class porn stars. However, some people like a variety of porn videos that are played by amateur model. They liked the videos in that category because they see sex game that is played look very natural. The site certainly did not want to make a disappointment for the visitors. Therefore, they provide a variety of video porn in the category of either the model or type of sex game.

You may be one of the many people who like to watch porn videos. However, you are still confused to choose quality sites that can provide a variety of porn videos free and fun. In this case, you might consider visiting http://www.bangyoulater.com/ to find what you are looking for. Of course, to be able to become one of the visitors or members within the site, you must be aged 18 years and over. You can get a lot of comfort and ease of access for a mobile facility is now also available for those who want to watch porn videos through the iPhone or iPad. You can enjoy all of the comforts and pleasures.

Car Finance Places You On The Top Gear While Buying A Car

2011-12-19T06:57:00.000-08:00

Fast car on open roads. It is a perfect picture for any car enthusiast. But you have to go to your work and also drop your kids to school. This is the real picture for most of us. We need to save time when we don't have any. A typical individual has so many odd jobs to complete that a car can, without doubt, facilitate their accomplishment. Financing your car doesn't fit your idea of the way of buying your car; then probably you are still stuck with traditional car buying methods. Shed your inhibitions with regard for car financing because it undoubtedly keeps in mind your financial caliber before furnishing you with a car finance loan.

Car financing has taken a new spin with regard to providing investment for buying a car. So, how do you finance a car? If this question leaves you baffled, then you have to go a long way in the process of buying a car. The term 'financing' in relation to buying a car connotes either rendering loan to buy the car or lease the car to you. You are probably concentrating on the former meaning. Many people are in favour of talking car finance from dealership for it seems like a convenient option. It seems easy; you select a car, fill out a credit application, and drive away with your car - all in a day's work. Car finance through dealership will give you car finance on weekends and even at nights when other banks and credit unions are closed.

Seems convenient, isn't it? But there is a catch. The dealer will be certainly charging you more for your car finance. Usually car buyers are overcharged by 3% on their car finance. A great number of complaints about car financing are related to dealers. 0% APR is not only attractive but lures the buyers to acquire up car finance not meditating if it is feasible for them. There are very few people who can actually get a 0% APR. Thus car finance deals usually fall midway thereby making car finance experience an extremely distressing one. You are buying a new car and probably for the first time, you certainly want it to compliment your enthusiasm. There are few elementary things that need to be kept in mind before taking that crucial primeval step in car buying.

First and foremost in car buying and financing is checking your credit score before you apply for a car loan. Many people are unaware of the fact that they even have a credit score. You can expediently check your credit score online. So, if you have bad credit history then probably you will be paying more interest rate for your car finance. If your credit score drops below 550, then probably apply for new car finance is not such a good idea. First repair you credit score. Repairing credit score requires little effort, helps you repay your debt and retain your credit report. Online car finance companies can get you car finance loan even if your credit score is lower than required. Your car finance loan can get approved in minutes. Online car finance companies have revolutionized car finance procedure. With lowest online car finance rates, no application fees, or down payments car finance companies provide a formidable competition to car dealers. Car finance companies have set a standard for providing car finance that is worth opting for.

70% of cars are obtained by some kind of financing. You can even finance a used car. The process is as effortless and undemanding as financing a new car. The essence to finding the right car finance is doing to research about your kind of car. Knowledge is power; you must be awake to this age old logic. When so much information frequently exists, then why not make use of it. Find out how much your car costs by comparing rates with local dealers. Very decisive, is cognizing how much, you can afford. Calculate, you monthly income and deduct your usual monthly expenditure to find out how much you can afford on a monthly basis. Compute carefully, otherwise you will find difficulty in repaying your car finance loan. And you definitely don't want to fool around with your repayment plan because a lot is at stake. You can seek free advice for your own car finance online through credit unions and loan institutions.

You are a car enthusiast, a car consumer, a just a person who needs a car you ought to drive the best car. And why not drive the best car, when you have access to the best car finance plans. Car financing is a transparent route that leads you to become a car owner. Car finance loans are usually short term loans ranging from 36 to 72 months. Shorter loan term imply, lower interest rates and will prove to be cheaper. You have been working hard to select the car you want; there is a fairly good chance that you would not have to work so hard for car finance. So, sit back relax and enjoy the ride.

Finance, Credit, Investments - Economical Categories

2011-12-18T06:55:00.000-08:00

Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.

The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in "the general theory of finances" there are two definitions of finances:

1) "...Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage". This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;

2) "Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production". This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.

First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.

This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.

Second, main goal of finances is much wider then "fulfillment of the state functions and obligations and provision of conditions for the widened further production". Finances exist on the state level and also on the manufactures and branches' level too, and in such conditions, when the most part of the manufactures are not state.

V. M. Rodionova has a different position about this subject: "real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit". V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: "financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests".

In the manuals of the political economy we meet with the following definitions of finances:
"Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests".
"The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations".
As we've seen, definitions of finances made by financiers and political economists do not differ greatly.
In every discussed position there are:

1) expression of essence and phenomenon in the definition of finances;

2) the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.

3) Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.

If refuse the preposition "socialistic" in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective "socialistic", in the modern economical literature. We may give such an elucidation: "finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests". in this elucidation of finances like D. S. Moliakov and V. M. Rodionov's definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern "distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth". This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.

"Finances - are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage".
"Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources".

We meet with absolutely innovational definitions of finances in Z. Body and R. Merton's basis manuals. "Finance - it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person" . "Financial theory consists of numbers of the conceptions... which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place" .

These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people's requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.

For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.

Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit's existence in the consistence of finances.

N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its "characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners' rights".

N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.
Let's discuss the most spread definitions of credit. in the modern publications credit appeared to be "luckier", then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: "credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower".

This is the traditional definition of credit. In the earlier dictionary of the economy we read: "credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent".
In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: "credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation".

Credit is discussed in the following way in the earlier education-methodological manuals of political economy: "credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition".

We meet with the following definition if "the course of economy": "credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation".

Following scientists give slightly different definitions of credit:
"Credit - is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower".
Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan's movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.
Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.

Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:

o Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;

o The loaning of money may bear no interest;

o Any person may take part in it.
With the difference with loan, credit, which is somehow a private occasion of the loan, represents:

o One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;

o It may not bear no interest (if the assignment doesn't foresee something);

o In it creditor is not any person, but a credit organization (at the first place, banks).
So, a credit is the bank credit. To our mind, it is not correct to use "credit" and "loan" as the synonyms.
Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:

a) Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);

b) Its opportune returning;

c) Getting percentage rate from the borrower for using the sources under his/her disposal.
The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin "credo", from which comes the word "credit", means "trust").
From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.

From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn't take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.

From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers' means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.

From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.
Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.

Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination "funding of the cash sources (fund formation)" reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, "unloading" with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.
In the discussing context we consider:

1) wide and narrow understanding of economical category of the finances;

2) discussing finances in narrow understanding under general traditional meaning;

3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances - in narrow meaning and credit - in complete meaning.
Termini "funding" and its equivalent "fund formation" are used by us as the purposeful structuring of cash means, which is based on two poles - accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.
We have established a new termini - "finance-investment sphere" (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word "financial" is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments' economical categories.

Let's sum up middle results of discussing new concept - "finance-investment sphere" and discuss its investment consisting parts.

The concept "investments" was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place "investments" the termini "capital placement", which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the "investments", consequently it is possible to use them as synonyms. Though the termini "investments" and "investing" have the advantage towards the termini "capital placement" from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini "investment" itself, but also it gives an opportunity of termini formation. More concretely: "investment process", "investment domain", "finance-investment sphere" - all these termini are much more acceptable.
Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The "movement" of these termini is approved in the narrow professional bounds, but their "spitting out" into the economical science may turn economical language into the tangled slang.

Let's discuss termini - "investment" and "capital placement's" usage in the economical literature.
Investments are placement of funds into the main and circulation capital for the purpose of getting profit. "Investments in material assets - are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments".

We don't meet with the termini "investments" in the earlier economical dictionary, but we meet the combined termini "investment policy" - the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble". For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.

A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):

- economical development according to the key directions to the concentration;

- providing high rates of economical growth;

- raising an economical effectiveness, which is expressed:

a) by growing the throw off of the production and national income for every lost Ruble;

b) by fulfilling the branch structure of the investments;

c) by improving their technological structure;

d) by optimization of their further production structure.

Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the "Economics" seems to be unimproved: "investments - the expenses of gathering production and industrial means and increasing material reserve". In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.

Except the termini "investments", there are two more termini related with the investment. They are shown below.

"Human capital investment" - any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers' education, health and raising the mobility of the working forces". It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.
"Investment commodity, capital goods - a capital."

In the official manuals of political economy of the reformation time the capital investments are discussed as "expenses for creating new main funds and widening, reconstruction and renewing the active ones". In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves):

a) creating new ones;

b) widening;

c) reconstruction;

d) renewing.

Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place".

You'll meet below the definitions of investments from "the course of economy": the investments are called "placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. "According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments".

They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.

"They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments - capital investments for the purpose of increasing basic means". Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.
Human capital investment is "a specific kind of investments, mostly in education and health protection".

"Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means". We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).

"Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing". We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: "we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital."

In the "economical course" quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to "one month or more" investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don't agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn't combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:

- less then 6 months - quick compensative;

- from 6 months up to the year and a half - middle termed compensative;

- more then the year and a half - long termed compensative.

We stopped at the definition of the investments in the capital work "economical course" for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.

We'll return to the discussion the definition economical category of "investments" in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.
What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?

There is quite deeply, concretely and thoroughly defined the concept of "investments", different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph , even if it has a title investment, as an economical category , there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, "a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only - definition".

But the categories are much wider; it is "a key, the most fundamental concept of every science". Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.
Our goal is exactly to substantiate investments - as an economical category and also, as a financial category in the narrow understanding.

Here we apply for another manual thesis made by the academician Vasil Chantladze: "every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category".
In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture's activity, and, from another one, - a part of income, which, in this case, is not used for usage.
Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between "placement of funds" and "investments".

As we've mentioned above, not long ago, in the well-known Soviet literature the concepts of "the placement of funds" and "investments" were accepted to be the synonyms and concerned to be investment of sources for further production of the main funds and formation of the turnover funds. We meet with such understanding of the concept of "investment" (here, they separate three types of the investment expenses: investments in the basic capital of investments, investments in the house building and investments in the reserves) in the modern economical publications and it is mostly used on the macro level during a statistical analyze of economical processes. In this concrete occasion investment is the category of reserve.

Customer Finance Programs Key to Increasing Sales

2011-12-17T07:00:00.000-08:00

While studies show that technology spending is once again on the rise, there's a reason you haven't heard a collective sigh of relief from the software industry. While many budgets are once again allowing for the purchase of enterprise software, hardware and peripherals, there's no question that today's purchasers are smarter, savvier and more selective than ever.

Even though the purse strings have loosened, competition is at an all-time high. It's no longer enough to provide a software solution that meets the potential customer's needs, or even to provide it at the best price. Today, smart vendors are constantly looking for ways to stay one step ahead of the competition.

While increasing sales is always part of a competitive business strategy, software development companies often overlook a simple method of accomplishing this objective - making it easier for customers to buy.

One option increasing in popularity among software vendors is to establish a customized finance program that provides no-hassle financing solutions for your prospective clients. In addition to "one-stop shopping," your customers can reap the other benefits of financing that make it easier for them to commit to technology purchases, including:

100 percent financing -- Many finance companies offer 100 percent financing for the cost of software and maintenance contracts, which requires no down payment. Because customers don't have to come up with a down payment, they can make a purchase immediately, rather than hold up the sale with a "wait and see" mentality that often accompanies a dip into cash reserves. It also allows your customers to invest more capital in revenue-generating activities.

Improved cash flow management - With software financing, your customers can conserve capital for reinvesting in their business and improve budgeting accuracy through fixed monthly payments. Financing also makes it easy for customers to access multiple-year budgets by paying for the benefit of your software over its useful life.

Flexible payment structures - Customers can optimize project budgets by taking advantage of the flexible payment structures available through financing to maximize the return on their investment. For example, with software financing, customers can ramp up payments to match the revenue generation of a new technology project that is utilizing the software being financed.

While financing provides a clear advantage for the buyer, when a program is well planned, the list of advantages for software developers, distributors and resellers can be even more beneficial.

Improved Customer Relations

As noted above, financing packages add value for the customer by enhancing their buying power, offering greater flexibility and providing convenience. It also increases their satisfaction through the ability to leverage their budget to acquire the total technology solution - which could include software, hardware, service, support, integration and training - rather than only the parts and pieces they could afford through an outright purchase.

Shorter Sales Cycles

On the sales side, any customer who expresses some interest in a product seems like a good lead. However, there are many times when the question of how to pay for the new software prevents the sale from happening. Time lost on dead-end deals can be eliminated when financing is part of the sale, as the ability to pay is immediately considered in the equation. In addition, many finance companies now offer fast, easy credit and documentation processes, so you can complete a sale quickly and avoid costly processing delays.

Another benefit is that as software needs are being discussed in the sales process, the finance specialist can work with the chief financial officer or accountant to determine which financing option and payment plan best suits business needs and cash flow.

Direct customer financing can also save software vendors millions of dollars each year by reducing the number of days a sale is outstanding. Consider a company with quarterly cash sales of $50 million. On average, it can take 45 days to collect payment. Assuming a borrowing rate of 6 percent, the 45-day lag in payment results in a carrying cost of $371,204. If the same numbers are run with a leasing finance program that generates payment within 2 days, the carrying cost drops $82,253, saving the company more than $288,951 in one business quarter.

The Big Picture

Overall, equipment financing programs can:

Generate larger, more profitable sales faster;

Increase account control;

Improve sales efficiency and productivity;

Lower days-sales-outstanding;

Improve cash flow;

Differentiate your company from its competition; and

Provide complete solutions for your customers.

Taking the Next Step

After identifying an interest in offering flexible financing as part of the sales process, the next step is to develop a finance program. By partnering with an experienced leasing company to develop a finance program for your customers, you can transfer all of the uncertainties of extending terms to your customer to the finance company.

Partnering with an experienced finance company also means you can concentrate on what your company does best - developing software - while letting a finance expert handle the intricacies of a finance program. Put simply, by working with a third party, your company will receive all of the benefits with none of the risk.

Whether you choose to refer your clients directly to your financing program partner or to work with a third-party finance partner to develop an in-house program, it is essential to choose an experienced equipment finance partner. During the sales process, the finance expert will be working closely with your customers, and it's important that his or her actions and service levels reflect your company's ability to meet your customers' expectations. When searching for a finance partner, look for a company that:

Is flexible and willing to work with your management team to develop a program that will meet your financial objectives;

Is experienced in the IT and software finance world, since the sales process, client-decision criteria, and revenue recognition issues are different than that of capital asset sellers;

Provides marketing support and materials to help you promote your financing program

Is willing and able to provide your sales team with materials and training to ensure sales team members are comfortable and easily able to raise financing as an option with their clients; and Is a financially stable, long-term business partner.

Companies in search of a leasing partner can visit Choose Leasing (www.ChooseLeasing.org), a Web site developed by the Equipment Leasing Association, where you can find answers to commonly asked questions about leasing and search for an experienced leasing company specializing in vendor finance programs.

The Choice of Porn Websites for You

2011-12-15T08:52:00.000-08:00

As the increase of technology, the use of virtual world in daily life of human has become wider and wider. This information technology has also exploit by the porn industry in order to market their products closer to their customers. Now a day, we can find hundred or maybe thousand porn sites that can be found in the virtual world. This rapid growth of amount of the porn websites often make us confused to choose the best porn sites that will give us the attractive porn scenes for our satisfaction. To choose the suited porn sites for you, you can get the reference for it in many porn website reviews such as porn xchange. In this site, you can get various kinds of information about the popular porn website with the best porn video that you might get, and also the each type of paying system that is offered by the porn sites will also be explained in this review.

There are many kinds of porn websites that offer the various numbers of porn contents that has been known as the one of biggest porn content provider such as reality king. Every porn website usually has the own specialization in providing the porn contents. Before you choose to subscribe yourself to the one of the porn websites, it is better to learn about the specialties and the offered features and facilities by the websites. Those things will make you able to consider the benefit or the disadvantages that you might get by subscribed to the specific porn websites.

It is important to know and recognize what you will get, both the advantages and disadvantages in the websites. Moreover, usually you have to pay some money if you want to get the full porn contents from that site. So, reading the porn website review such as reality king review will make you able to consider before you take the packages that is offered by the porn sites and make sure that you will get the satisfaction that comparable with the price that you pay for it.

All You Need is Hot G Vibe for the Best Sex Toys

2011-12-13T07:04:00.000-08:00

Purchasing vibrator or any other type of sex toys by the internet might not as simple as it looks. Many people might see internet as a better place for them to purchase sex toys, not only because of greater variety of sex toy that they can get from many online shop, but also because they can get whatever product that they want, no matter how kinky it is, without being embarrassed if someone catches them buying such a sensitive product. Even though it may seem beneficial if we take a look to this side, it does not always be the same if what we are dealing with is so many selections of product with different quality, offered by numerous online sites.

Try to submit the word dildo on your internet search engine. You might have hundred or even thousand sites in the searching result, and all promises that you can get the best quality of dildo from them. Visiting one after another to get the product that you need with the best quality is not at all an option, considering how much time that you need to get even only one product. This is not to mention the risk that you have to deal with, if eventually the site that you select is the fake one, providing you nothing but promises to get the product delivered to you after you transfer certain amount of money to their account.

Instead of dealing with such complexity, all you need is to visit one site, hotgvibe.com. They are the trustable provider of many types of sex toy, including dildo, vibrator, vibrating ring, and many others. If you care to check the customer review of the site, including the quality of their product and service, you will be sure that this site is what you need to get your favorite sex toys delivered to you, even in better quality that what you have expected before.

Why We Can't Finance Your Supplier

2011-12-07T15:19:00.000-08:00

Every so often, we speak to customers that need purchase order financing because their supplier is unable to give them terms. Notice that I didn't say unwilling - I said unable. Usually the supplier has had some cash flow problems of their own and are asking for full payment before being able to produce the goods. They ask for the advance payment because they need it to pay for their own raw materials and labor. IN effect, they are asking their client to finance them.

Unfortunately, if a client of ours was buying from the above mentioned supplier, we would not be able to finance the order. And personally, I don't think that any business financing company that offers PO financing would be able to fund this order either.

Why? For one simple reason. Purchase order financing is a tool that wholesalers can use to guarantee a payment to their suppliers who are not willing to give them payment terms. However, it is not a tool that is used to finance your suppliers that have cash flow problems. Think about it this way, if a purchase order financing company prepaid that supplier so that they could manufacture the goods, it would be as if they were giving them an unsecured loan. Why would a purchase order financing company do that? PO financing companies are in the business of financing their clients - not their client's suppliers. If the supplier needs business financing - they should look for it themselves!

Most purchase order financing companies protect themselves (and their clients) and minimize supplier problems by insisting to pay suppliers by letter of credit or a similar instrument. This protects all parties in the transaction. However, if your supplier has cash flow problems, it's unlikely that they will accept this type of an agreement.

Financing Commodity Transactions with Purchase Order Financing

2011-11-15T07:54:00.000-08:00

Every so often we get an inquiry from a company that wants to use purchase order financing to fund a commodities transaction. Unfortunately, I have never seen a single transaction succeed. At the surface, purchase order financing would seem like an ideal solution to finance a commodities transaction. But once you look at the details, transactions always fall through.

By the way, I am not saying that purchase order financing has never been used to finance a commodities transaction..... I am just saying that I have never seen one done and I have been at this for a decade. Here are some reasons why these transactions fail:

Gross Margins: Most PO financing companies will only work with transactions that have minimum gross margins of 20%. In fact, many prefer to see 30% gross margins. Having high margins offers some protection to the business financing company if there are any problems with the transaction. For example, if some product if damaged during transport, a high margin transaction will be less impacted than a low margin transaction.

Also - and this is very important - finance companies prefer to work with high margin transactions because purchase order financing is expensive. There are no two ways about it - PO funding costs more than conventional funding. Working with high margin transactions helps ensure that clients still have plenty of profit left after financing costs.

First Timers/Novices: The commodities field is full of startups that have high hopes but little transaction experience. Many of these companies have unrealistic expectations about their transactions. For example, many will claim they can sell oil or coffee at 30% gross margins if they could get the funding. Unfortunately, that is not believable. Commodities tend to sell for single digit margins. PO financing companies prefer to steer clear of these types of transactions.

Questionable Suppliers: Many novices also tend to work with what I will call "questionable suppliers" that are located in far flung places of the world. Usually these suppliers offer products at "very cheap prices" but also have questionable demands. For example, this type of supplier may be able to sell product at a substantial discount but demands prepayment of the full amount by wire transfer and will not accept a third party product inspection. Many novices tend to want to work with these suppliers ,which again scares of funding companies.

MT1099 (Proof of Funds): Most po financing companies will not get involved in a transaction where the supplier demands proof of funds (e.g. MT1099). Most purchase order finance companies will not provide an MT099 to your supplier. Contrary to popular belief, MT1099's can be misused so many po financing companies steer clear from them. Most PO financing companies will be happy to pay your supplier with a letter of credit that is contingent on an inspection from a third party company. If you think about it, showing a letter of credit should be proof enough that funds are there.

On a similar subject, factoring won't be able to help many commodity trading companies either for the exact same reasons.

(**)

Why Do Purchase Order Financing Applications Ask For So Much Information?

2011-11-07T14:59:00.000-08:00

This is a common question that we get from prospects looking for purchase order financing - Why do purchase order financing companies need to ask for all these documents before funding an opportunity? Some include:

Income statement
Balance Sheet
A/R Aging Report
Copies of the purchase order
Other information

Simple - because they want to be certain they don't lose their money. Although many people have the notion that a purchase order financing transaction is almost "risk free", this is not accurate. Actually, PO financing transactions can be quite risky for the company. This is why they ask for this information. The company wants to make sure that:

Your company has some track record selling this product successfully
Your company is in stable financial shape
That your customers and suppliers are solid
That your invoices are free of liens or encumbrances

This is where all the information that the purchase order financing requests comes in. They use it to determine the risk level of the transaction.

Also, I'd like to mention a few things that can go wrong with a purchase order funding transaction - if only to prove they are not risk free:

Your supplier can deliver faulty goods and not correct the problem (supplier risk)
You could deliver the product and have a customer that refuses to pay (credit risk)
Your goods could meet the specifications but the client could still claim the goods are not satisfactory (disputes)
There could be a mismatch between your customer requirements and the requirements that you gave your supplier (operational risk)
The transaction could go well but a previous lien holder (i.e. tax lien holder, judgement lien holder) that has a higher position lien than the po financing company (asset security risk)
And more!

All of these could go wrong and you would have a situation where the purchase order financing has already paid for the goods, but with a minimal chance that the transaction will conclude sucesfully. This is also why purchase order financing rates are higher than factoring rates - the risk is higher.

Are Suppliers Guarantees Useful?

2011-09-01T09:21:00.000-07:00

Supplier Guarantee

The sort answer is - yes - provided your supplier is willing to work within the terms of the guarantee. We have covered supplier guarantees (also known as vendor guarantees) in a previous post. But in summary, in a supplier guarantee the factoring company agrees to pay your suppliers our of the factoring proceeds. This gives your supplier the assurance that they will get paid before you do. But, only if the order creates a factorable invoice that is funded.

There are two advantages to the supplier. First, since the factoring company pays the supplier, the vendor guarantee reduces the concern that the vendor may have about your company's credit. Second, it allows the supplier to sell additional goods to your company.

However, using this type of an arrangement is not without risks to the supplier. There are two common risks. First, your company could fail to deliver the order. This can happen and it means there is no invoice to factor and thus no payment. Or second, your company could chose NOT to use invoice factoring for that particular invoice. Remember, the factoring company only pays the supplier out of factoring proceeds. Obviously there are other risks - but these are the two that most suppliers focus on.

For a supplier guarantee to be useful to your company, you need to convince your supplier that your company can deliver on the order AND that the invoice will be factored. Said simply, you need to prove that you are a safe risk. In my experience, supplier guarantees work best when you already have credit (and therefore trust!) from your supplier but have an increase in orders that exceeds the credit that your supplier is willing to provide. But when used appropriately, and with the right factoring company, they can help your company grow.

Government Contractors May See Tough Times Ahead

2011-08-12T09:50:00.000-07:00

The US Government has a number of programs that are designed to help small businesses sell to the government itself. These are great because the US Government is a great customer, a steady payer and more importantly, a customer that buys goods and services even during recessions. On the other hand, we have all seen the recent debt ceiling discussions that emphasized that government must cut back their expenditures. This may be a tough awakening for many entrepreneurs. Here is a link to the WSJ article about government belt tightening.

How much of this will affect small businesses - that's hard to say. However, one has to keep in mind that small business grow is needed if the economy is to start adding jobs. Recent small business optimism numbers are not very encouraging so my personal belief is that - if possible - government should minimize any changes to the small business programs.

Many purchase order financing companies do business with government contractors. Obviously, they stand to feel a squeeze in their revenues if the government reduces their help programs to small government contractors. This may also affect conventional factoring companies because many of them offer factoring to government contractors. It's hard to say how it will play out.

Small Businesses Are Depressed

2011-08-12T08:45:00.000-07:00

The Small Business Optimism Index is going down - and that's not good. Small businesses are one of the engines of economic recovery and without them any employment recovery will likely stall and spiral down. Small businesses are of strategic importance and therefore the government should promote conditions where they can succeed - or at least have a go at trying to succeed.

Some experts say the problem is lack of sales not lack of funding. Other experts say it's lack of funding, not lack of sales. Personally, I think it's a little bit of both. There is a problem with sales demand but also a problem of access to capital and business financing. Stimulating demand/sales is a politically charged subject - so I will avoid it. However, most would agree that appropriate access to properly (risk adjusted) priced business financing would help the situation. And at this point in the economic cycle - this is not happening.

We see this all the time on the purchase order financing side of our business. We have noticed that there is an influx of prospects that have good financials and should qualify for bank financing - but they aren't. They are being declined by banks. They come to us because we are their "Plan B". The problem is that Plan B is more expensive that conventional bank financing so these companies are seeing increased financing costs - which drags down profits. I think this is a problem of our current economic environment that needs to be addressed.

Small Business Lending Increasing - And An Interesting Caveat.

2011-05-02T12:51:00.000-07:00

It seems that today is the day for good news. In my other blog, I posted about the increase in construction activity and how manufacturing is in positive territory. Now, for more good news, small business lending is up. You can read about it here.

The interesting caveat, about half the companies looking for business financing went with smaller or mid sized banks (instead of a big bank). We have actually seen this happen in our business as well. About six months ago we noted that we were loosing some invoice factoring and purchase order financing prospects to banks. But not to large banks. With few exceptions, we lost it to small or medium sized mid west banks which seemed to have escaped the real estate mistakes of their bigger rivals.

An increase in conventional lending is good for the economy as a whole. In my view, purchase order financing has it's place in the business funding ecosystem. It's a solution that is used by small and mid sized companies that have a large order that can't be financed through conventional means - usually because the company has limited credit history or limited experience. In other words, it's more expensive than conventional funding. However, during the credit crunch, banks started turning companies away simple because they had no money to lend. This forced companies with good credit profiles to seek alternative funding as a last resort. Since products like factoring and purchase order financing are more expensive than conventional loans, companies saw their funding costs increase.

It seems that slowly (but surely?) we are heading towards a normal environment, where companies with solid credit profiles will be able to secure conventional bank financing at appropriate rates. I sure hope this happens fast - the economy needs it!

Vendor Guarantees - An Alternative to PO Financing

2011-04-21T13:02:00.000-07:00

Although purchase order financing is usually much easier to obtain than conventional bank financing it's not as easy to get as factoring. Most po financing transactions carry more risk than factoring transactions so that qualification requirements tend to be more stringent. Also, since purchase order financing transactions are considered riskier, they carry a higher cost.

However, there is an often overlooked alternative called vendor guarantees. Many times, vendor guarantees can be used in place of po financing. And, these can easily be integrated into most invoice factoring programs and have similar pricing.

How do vendor guarantees work? This is easier if explained by an example. Let's first look at a conventional invoice factoring transaction:

You deliver the goods to your customer
You send the invoice to the factoring company
The factoring company advances you 80% of the invoice
You get the remainder 20%, less a fee, once the customer pays in full

In a vendor guaranty situation, the factoring company agrees to pay your supplier out of factoring proceeds before paying you. Your company, the factoring company and your vendor/supplier sign a three party agreement that allows the factoring company to pay your supplier before paying you.

A vendor guarantee can be used to get higher (or better) credit terms from your vendors because a financial intermediary is involved. The transaction would works as follows:

You deliver the goods to your customer
You send the invoice to the factoring company
The factoring company advances your vendor funds to cover their invoice (up to 80% of your invoice). Any difference is remitted to you.
You get the remainder 20%, less a fee, once the customer pays in full

Why would a vendor accept this type of arrangement? They would because they know that the payment is coming from the factoring company. However, and this is very important, the factoring company will only forward a payment to your vendor if you factor the invoice and only up to 80% of the invoice (this varies).

Many times, a vendor guarantee can be used instead of purchase order financing, making this solution something you should consider.

This short article is only a summary of how vendor guarantees work. One word of advice, be sure to use an attorney to help you understand them and their ramifications.

Disclaimer: This post is for information purposes only. Please consult an advisor if you require financial/legal advice.

Combining Factoring and Purchase Order Financing

2011-04-12T08:48:00.000-07:00

In my last post, I wrote about the benefits of combining factoring and purchase order financing. Generally, combining both products yields a lower total cost. To some, this sounds counterintuitive so today I'd like to expand on that by giving one example with numbers, which will help readers understand this.

Transaction Assumptions
Let's assume that Reseller Inc is buying widgets from China and selling them to a Big Box retailer in the USA. Let's assume that Big Box issued a po for $100 to Reseller Inc. Reseller Inc will need to pay his supplier $70 for the the goods (making the Gross Margin 30% - $30/$100 * 100). Let's assume it takes 30 days to manufacture the goods in China and bring them to the US. Likewise, it takes Big Box 30 days to pay the invoice in full.

The purchase order financing plan advances 70% of the $100 Big Box PO and charges 3% for every 30 days. The factoring plan charges 2% and advances up to 80% of the gross invoice.

Using PO financing + Factoring:
1. On day 1, the PO financing company writes an payment covering the $70 cost of goods to supplier
2. On day 30 the goods are delivered to Big Box along with an invoice for $100
3. On Day 30, the invoice is sold to the factoring company.
4. The factoring company advances 80% of the invoice (or $80), split as follows.
   a) $72.10 to the po financing company ($70 + $2.10 fee. The $2.10 comes from $70 * 3%)
   b) $7.90 to the client
   c) Note that $72.9 + $7.90 = the $80 dollar factoring advance
5. On day 59, Big Box pays $100
6. The factoring company settles the transaction as follows:
   a) $80 to the factoring company (recoup their $80 advance)
   b) $2 fee to the factoring company ($100 * 2%)
   c) $18 is given to the client

Total fees for this transaction are of $2.10 for po + $2 for factoring = $4.10. The client got $7.9 from the factoring advance on day 30 and $18 at factoring settlement for a total of $25.9.

Using PO financing alone:

1. On day 1, the PO financing company writes an L/C covering the $70 cost of goods

2. On day 30 the goods are delivered to Big Box along with an invoice for $100

3. On day 59, Big Box pays $100

6. The po financing company settles the transaction as follows:

a) $70 to the po financing company (recoup their $70 supplier payment)

b) $4.2 fee to the po financing company ($70 * 6%)

c) $25.8 is given to the client

The client gets $25.8 on day 59 at settlement.

One thing that usually confuses people is that invoice factoring plans and po financing plans are charged differently. The purchase order financing fee is based on the funds paid to the supplier, in this case the $70. The factoring fees are based on the gross invoice of $100 and NOT on the factoring advance of $80.

Selling More Without Going Broke

2011-04-11T15:26:00.000-07:00

Most product resellers think that getting a large order, or a number of large orders, is the best thing that can happen to their business. In reality, it's only a good thing if you have the capital or business financing to fulfill the order. If you don't, it can quickly turn into a nightmare.

Let's look at a typical example scenario. Johnson Products Supplies imports widgets from China and sells them to big box retailers in the US and Canada. His Chinese suppliers demand prepayments, or payment by letter of credit. His clients pay invoices in 30 to 60 days. For any order, Johnson products needs to pay the supplier, wait 30 days for the goods to reach the US and then wait an additional 30 to 60 days to get paid. In total, the the transaction may last 60 to 90 days. It will take that long before Johnson Products sees any money out of the transaction.

In the meantime, the company needs to pay employees and other expenses associated with the business. It's easy to see how without a large capital cushion, the company could run into problems. Depending on the size of their cash cushion, a few large orders could decimate savings, forcing the owners to delay critical payments (or orders) until current invoices get paid.

One way to solve this problem is to use business financing to cover supplier payments. One alternative solution is to use purchase order financing. PO funding is a specialized tool that can be used by resellers. It covers your supplier costs, enabling to fulfill large orders without having to worry about how to pay your suppliers. That transaction is then settled when the customers pay for the goods.

In many instances, combining factoring and purchase order financing may help a company achieve lower financing costs. These combined transactions are usually structured as follows:

The purchase order financing company pays your supplier
The supplier delivers the goods to your client
Once the goods are accepted, you invoice your client
You factor the invoice. The factoring company pays off the purchase order financing company
Once the end customer pays for the goods, the transaction is settled with the factoring company

Although combining factoring and purchase order financing can add some minor complexity to the transaction, it can usually decrease the total cost. This is because (on average) the cost per dollar of po funding is higher than the cost per dollar of factoring. PO funding is more expensive than factoring for a simple reason: financing a purchase order (a promise to buy) has higher risk than financing an invoice (a promise to pay).

Why a Purchase Order Financing Company will NOT pay your Suppliers in Cash

2011-02-23T08:49:00.000-08:00

One common request we get from purchase order finance clients is to pay their suppliers in cash, rather than by letter of credit. While po financing companies can pay suppliers in cash (or wire) after the goods have been shipped and inspected, most will not prepay for the goods in cash.

Why? Simple, an advance cash payment to a supplier is the equivalent of giving them an unsecured loan.

Let me give you an example. Let's say that ABC Importers if buying widgets from a supplier in another country. Let's say that the supplier is demanding either a deposit or a full payment of the goods paid by wire (TT) prior to the start of manufacturing. There are usually two reasons why they may be making this request:

a) They don't trust you
b) They need the money to be able to fulfill their order

If their issue is a), lack of trust, then that can easily be solved with a properly executed letter of credit. In my experience, the reason most suppliers ask for cash is because they really need it. If you (or the purchase order financing company) pays them, you are giving them an unsecured loan (or use of your cash). Now, what happens if they default in your order, provide unacceptable product or just go bankrupt? How do you get your cash back?... The short answer is that you don't.

As a rule of thumb:

a) Most po financing companies will not prepay your foreign suppliers by wire (in cash)
b) Some po financing companies may do a "cash against shipping docs" arrangement for foreign deals
c) Some po financing companies MAY prepay your US suppliers if they are large and credit worthy (think Dell or GE).

Some companies just don't like dealing with letters of credit, mostly because they require some additional work on part of the parties that want to do the transaction. In our view, the extra work is well worth the protection that a properly worded letter of credit (usually in conjunction with an inspection of goods clause), can provide you.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Why PO Financing does NOT work for commodities transactions

2011-02-22T08:46:00.000-08:00

Lately, I have seen an increase in the number of prospects looking to use purchase order financing to fund a commodities transaction. Unfortunately, these transactions seldom work. The pain reason why they don't work is that commodities usually sell for low margins - 5% to 10%. Purchase order financing only works for transactions where are margins are 20% and above. This ensures there is an adequate margin of safety if things don't go as planned.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Purchase Order Financing and Manufacturing (Debunking Myths)

2011-01-11T11:28:00.000-08:00

One of the disappointing aspects of purchase order financing is that it can't be used by most manufacturing companies. This saddens me a bit because I am a big believer that manufacturing should be play a big role in our economy and would like to help with that.

Most people believe that purchase order financing works as follows: a finance company advances funds against the po, which enables the client to buy supplies, manufacture goods and fulfill the order. Unfortunately, this concept is not 100% accurate. Not even close.

First, let's debunk some myths:

1. The PO finance company will advance me a % of the po: Not true. The po finance company will only pay your product supplier directly.

2. I can use PO financing to cover payroll and other manufacturing costs: Not true. See #1.

3. I can use PO financing to buy supplies - then use to make a product: Not likely. See #2.

So, if a po financing company will not do #1, #2 and #3 - what DO they do?

The Typical PO Financing Client
Let's start with the typical client. A PO financing company will only work with a product re-seller or a manufacturing company that sources their product out to a 3rd party. The common denominator is that the only companies that qualify are those that buy the product from someone else. This is done to eliminate so called "manufacturing risk" and will be clear in the next section.

Common Transaction Structure
The structure of a transaction is relatively simple. It works as follows:

1. You get an order from a client
2. You then place an order with your supplier
3. The funding company pays your supplier. But payment is either done:
   a) By letter of credit payable once goods are verified to meet requirements
   b) Cash against shipping documents with verification - a variant of a)
   c) Prepaid, if the supplier is a large reputable company (i.e. a member of the S&P 500)
4. Supplier ships goods
5. Goods are delivered to end customer
6. End customer pays for goods - transaction is settled

Manufacturing risk is reduced drastically by making sure that the company only pays for goods that conform to what the customer needs - and verified by a 3rd party. Obviously if something goes wrong in the manufacturing or production process, the supplier can't collect and the risk is minimized.

Why is manufacturing risk so scary?
Imagine a scenario where the finance company pays your vendors, who then ship supplies to your company. Your company then begins the manufacturing process - but for some reason - something goes wrong the the product you make does not meet your customers requirements. Your customer refuses to take the goods and the transaction falls through. Now what....? Remember that the financing company has already paid your suppliers and you needed that sale to be able to pay the financing company back. Suddenly you have a big mess and unfortunately it becomes your problem to solve. Not a good situation to be in...for either party. Let's keep in mind that most companies that look for purchase order financing don't have substantial assets - otherwise hey'd go to a bank.

I get it! So purchase order financing is risk free for the finance company (at my expense!)?
Not even close. It's easy to think that, but even without manufacturing risk, things do go wrong.... more often that you'd think. There is substantial risk in the transaction. However, by reducing/eliminating manufacturing risk, the purchase order financing company can make the risk manageable to them.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Can Purchase Order Financing Be Combined with Other Types of Funding?

2010-12-14T11:58:00.000-08:00

In a recent post, I talked about combining purchase order financing with factoring from a cost perspective. Now, I'd like to broach the subject from a different perspective. Here are two scenarios:

1. Company A: They have a line of credit based on accounts receivable (similar to factoring). The line of credit has a UCC Lien that encumbers all assets, including receivables.

2. Company B: They have no financing whatsoever. Assets are unencumbered.

Assume that both companies are good candidates for purchase order financing. Could they both get it? Well, Company B could get it for sure. Company A's situation is a little bit trickier because they have their invoices/receivables encumbered by a UCC.

Think about it this way - the collateral for a purchase order financing transaction is the invoice that is generated when the goods are delivered. In Company A's situation, that invoice is already collateral for an existing loan, leaving the purchase order finance company (who paid for the goods) in a bad collateral position.

There is a solution to this problem though. The purchase order financing company and the bank that offers the line of credit could enter into an inter-creditor agreement, where the purchase order financing line would be taken out by the line of credit as soon as an invoice is generated. This allows both funding lines to co-exist while being reasonably collateralized. These can be tough to negotiate but can be done. On a tricky subject like this one, is best to consult a legal or financial advisor.

---
Looking for information on business funding? Read the purchase order finance blog

Should you Combine Purchase Order Financing with Factoring

2010-11-05T09:16:00.000-07:00

One of the most common sales pitches that factoring and purchase order financing companies use is to say that combining factoring and purchase order financing is cheaper - because you are refinancing an expensive transaction (po financing) with a less expensive one (factoring)

In general, this holds true. But like everything, the devil is in the details. Here is one important detail. Combining po financing and factoring, when margins allow, will be cheaper from a TOTAL TRANSACTION COST perspective if:

1. You can only factor enough of the invoice to close the po funding line. This means that in large margin transactions, you factor a partial invoice.

2. The rate differential between factoring and purchase order financing is such that the cost per dollar is cheaper for factoring. This is not always true!

Note that I am talking from a total cost perspective, not a cost per dollar perspective.

This graph shows two transactions at different Gross Margins. One transaction is for PO only, the other one combines PO and Factoring. This transaction assumes the whole invoice is factored (no partial factoring)

(click on graph to enlarge!)

The first conclusion I saw was that in transactions that have a gross margin that is higher than 25%, combining products yields a higher total cost.

Some assumptions for the model:
1. Transaction time - 30 days for PO and 30 days for factoring
2. Factoring rate - 0.075% per day
3. PO financing rate - 0.01% per day
4. Invoice size: $125

Like all models, this is not all inclusive and certainly it's not perfect. But the lesson is the clear - model your own transaction before assuming the "industry truth" that combining products is always cheaper applies to you.

Addendum 11/7/10 - Here is a post to help you better understand the cost of factoring.
---
Looking for information on purchase order financing? Read the purchase order finance blog

How to get Purchase Order Financing

2010-10-22T07:24:00.000-07:00

Today we will be doing a back to basics post. If you own a company and need purchase order financing, this post should help you find the best way to get to it. So, how should you approach getting purchase order financing?

The first step is to get educated. There are a lot of misconceptions about what purchase order financing is - and how it works. You can find a lot of resources in the internet. One good place to start is at the po financing resource center. Or you can also go here.

The next thing you need to determine is if your company will qualify for it. Here are some questions you should ask:

1. Are your gross margins more than 20%?
2. Do you resell products that are manufactured by someone else?
3. Do you have a non cancellable purchase order from your customer?
4. Does your customer have good commercial credit?
5. Is your business up to date in it's taxes?
6. Is the company free of liens, lawsuits and judgments?

If you answered yes to these questions, there is a good chance that purchase order financing will be a good fit for you. There is also a good chance that you will be able to obtain po financing.

The next step is to start calling companies that offer po financing to get details of how their specific plans operate. Many of them will be able to give you an approximate quote over the phone. Be sure to do you due diligence and call a few companies to learn their plans.

Some companies, though not all, may recommend that you also get factoring. Many times, factoring is offered in conjunction with purchase order funding (learn about the advantages and disadvantages of factoring).

Bear in mind that po financing transactions can be complex and have many requirements. I haven't listed them all here, but this should give you a good idea if you qualify for po funding.

---
Looking for information on purchase order financing? Read the purchase order finance blog

The Dangers of Over Selling

2010-08-24T10:11:00.000-07:00

Many years ago, I was involved in a sales call with a prospect that needed a purchase order financing solution in place to be able to complete a large sale. The prospect really wanted to work with us, but in his excitement, she embellished things and oversold us on the opportunity. Here is a small sample of what transpired.

What she said:
1. My business has years of profitable operations
2. My business has lots of assets
3. My suppliers are financially strong and technically capable

Here is what we found out after the due diligence:
1. The business only had a limited operational history
2. Depends how you "value assets". Many where not valued realistically
3. The supplier companies she worked with had a marginal track record

Initially we were excited about this opportunity. But got less and less excited as new surprises started appearing. Once our due diligence was complete, we found that the real story differed from what the prospect had told us. In fact, it did not look like such a great deal after all. More importantly, we started wondering what other things had been embellished in the purchase order financing application.

Ultimately, we decided not to go forward. Even though the deal was doable, we were now uncertain of what other surprises would be lurking out there. In my view, it would have been better for the prospect to be upfront with us. For starters, we would have determined that they had a good handle of their business since their description would have matched our findings in the due diligence. Obviously, this would had increased their chances of being successfully funded.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Timing is Everything in Purchase order Financing

2010-08-04T07:16:00.000-07:00

One of the fun aspects of working in purchase order financing is that we deal with entrepreneurs on a daily basis. Many of our clients are startups that have been around for less than a year. It's not uncommon for us to be dealing with a business owner that is juggling one thousand things at the same time. Unfortunately, we have also seen many owners drop a ball or two or three.

One of the biggest mistakes I see if when an owner postpones applying for financing early in the game. Many postpone it because they have other "more important" things to handle - such as working with suppliers and clients to get a large order ready. There is a problem with that theory - our prospects come to us because they CAN'T deliver the order without our funding. Wouldn't it be logical that they spend some time ensuring they will have funding before committing to a client?

I see this every day. We get contacted by prospects early but then, they delay their application until the absolute last moment - say three weeks before a supplier needs to be paid. This gives us very little leeway to correct any problems that could crop up. If something goes wrong - the transaction usually falls through because the company is out of time.

The better approach is to begin financing discussions early - so that there is ample time to handle any potential problems. Here is a list of some common "problems" that derail purchase order financing transactions:

1. Suppliers won't accept our payment terms (e.g. letter of credit)
2. Supplier has a bad commercial credit record or bad delivery record
3. Clients are buying the goods as a guaranteed sale or a consignment sale
4. Client has bad commercial credit

Usually, items 1 through 3 can be addressed by re-negotiating a contract with a supplier or client, provided you have enough time to do it and provided your client/supplier is flexible. However, if you wait until the last minute and try to negotiate this AFTER the contracts have been signed and you are getting ready to start the transaction your chances of success will be minimal.

Being an entrepreneur is not easy - many times it means that you have to handle have to multitask and do many things - of equal importance - at the same time.

---
Looking for information on purchase order financing?

What do you bring to the table?

2010-07-28T12:11:00.000-07:00

I recently put our home for sale using a flat fee MLS listing service. I decided to forgo of the services of a conventional real estate agent and do it myself. Why? Simple. I have used real estate agents a few times and I was not satisfied with their services, so I figured I'd take a go at it (note: I don't recommend this! Real estate transactions are complex.) I WILL use a real estate attorney to help me with all the documents though. Legal help is always a good idea when doing home transaction.

The first day I listed the property I got three calls. My heart sank when it was from agents that had seen my flat fee MLS listing and were trying to coax me into using their services. I kept an open mind and heard them out - in part because I am always looking at sales techniques. For the most part, they were disappointing. Most used a variety of inflated adjectives to describe themselves (e.g. experienced, knowledgeable and even "powerful" (!!)) but none of it backed it with facts (e.g. 20 years of experience in real estate, knowledge of the condo market, closed 15 transactions this year). If you think about it - their test is that they have to sell me on their ability to sell my property. They all failed.

There is an important lesson for anyone selling a product or service (like factoring or purchase order financing). People selling things shouldn't just focus on inflated words - they should use facts. And remember, people (or companies) don't buy products - they buy a solution to a problem.

--- Looking for information on purchase order financing? Read the purchase order finance blog

A Cold Christmas Season for PO Financing?

2010-07-16T08:07:00.000-07:00

Here is an interesting piece on how retailers feeling a holiday shiver. Retailers are no longer feeling as confident about the economy as they felt a few months ago. As the article says, many will tweak their holiday orders. This, coupled with the government's IT spending freeze, will probably give the purchase order financing industry a nasty double whammy for 2010.

The purchase order financing industry has a heavy concentration in the retail and government business sectors. Any decrease in these sectors will certainly have a negative impact in the industry. I guess my last two posts have had negative outlooks - I'll scour things to see if I can pick up some good news from somewhere. Unfortunately, the graphic I selected for this post reflects my opinion of the short term industry outlook.

---
Looking for information on purchase order financing? Read the purchase order finance blog

US Government Freezing some IT Projects

2010-07-16T07:32:00.000-07:00

I saw this piece in the WSJ about how the US Government was freezing some IT projects. Obviously this is scary to many small companies that established themselves as government resellers because the US government spends about $80 billion a year in IT.

If this materializes, the effects in the purchase order financing industry will certainly be felt. Many purchase order financing companies fund small and midsized government re-sellers - many of which may be expecting reduced or canceled orders.

---
Looking for information on purchase order financing? Read the purchase order finance blog

PO Financing Precious Metals and Stones (Gold, Diamonds and others)

2010-07-07T07:33:00.000-07:00

Every so often, we get a prospect who wants to use purchase order financing to finance a transaction to buy precious metals (gold bars, etc) or precious stones (diamonds, etc). The bad news - most finance companies (us included) will not finance those types of transactions. There are a couple reasons why we shy from offering purchase order financing for these transactions:

1. There is high risk of fraud: These commodities are valuable and have a substantial risk for fraud or robbery. Losses can happen because the product is altered or stolen at any time of the transaction. Since these commodities are fungible the risk of this happening is high.

2. Most have complicated structures

3. Criminal activity risk: Lastly, precious metals and gems can be used to launder money, usually unbenownst to many of the transaction participants. A diligent finance company that is involved in this type of transaction would need to spend a considerable amount of time and money in due diligence to ensure it is not (accidently) involved in an illegal transaction. And even then - there is still the risk that the due diligence officer may miss any problems.

Because of these risks, most companies in the industry will shy away from these types of transactions.

Who is your ideal client?

2010-07-02T09:30:00.000-07:00

Many small business owners take clients that they don't like - or that are not a good fit - simply because they need the money and want to grow the business. This strategy can work in the short term - especially if you need the money. It's hard to say no to a potential cash paying customer if you really really need the money.

One thing I learned from my own business is that taking clients that are not a good fit - that are not ideal clients - can hurt you in the long run. Many times you will find that:

1. They take a lot of time
2. They cause a lot of aggravation (and perhaps you aggravate them as well)
3. They sap your energy and the energy of your staff

I once read that every business owner should know who their ideal customer is, and spend their resources looking for them - and only them. This applies to us as well, of course. On the purchase order financing side, we have a set criteria of who we consider our ideal client/prospect. I'll share a few with you:

1. The must need business financing
2. They must re-sell products from suppliers
3. They must not manufacture or assemble the products that they sell (3rd party mfg is ok)
4. They must have gross margins of 30% or more
5. They must have a minimum of 50K in monthly sales (or 150K in quarterly sales)
6. Must sell to commercial entities of the US government

This seems like a nice all-encompassing list - but it isn't. It actually rules out a lot of prospects that would not be a good fit for us. I should note that we are NOT a good fit for them either :-)

When speaking with a prospect, I usually ask a series of short questions to determine if we are a good fit for them or not. Basically, they help me determine where they stand on items 1 through 6. I will talk about the criteria for factoring in my other blog.

---
Learn about business loan options and factoring.

Good news for those in IT

2010-06-24T08:34:00.000-07:00

According to this article, Dell expects to see higher revenues as corporations go through with their plans to replace old IT systems. This is good for both computer manufacturer's and re-sellers. Fortunately for those of us in the purchase order financing industry, computer resellers make fairly good clients. Especially those that work with large corporate clients and/or the government.

There is one catch about using purchase order financing in IT re-sale transactions. IT transactions generally have margins that are lower than 15%, while po financing companies like to work with companies that have margins of at least 20% to 30%. This may create a problem for some transactions. At the very least, it will require that clients use some of their own capital for the transaction. Company owners should always be mindful of transaction costs and only use po financing in those transactions where they have an ample cushion.

I expect that companies in this industry will certainly benefit from this trend though.

---
Looking for information on purchase order financing? Read the factoring blog.

Even Billionaires Have Cash Flow Issues

2010-06-22T14:47:00.000-07:00

I am a big fan of Planet Money - the NPR show and podcast about the economy. They did a recent post about a cash poor billionaire. In it, Elon Musk, the billionaire in question, declares that he is asset rich but cash flow poor.

This can be true for so many companies as well. In our case, they are purchase order rich, but cash flow poor and unable to deliver. I decided to post this link because sometimes our clients are embarrassed about needed our services (purchase order financing) - embarrassed about what their customers will think.

There is nothing to be ashamed of about asking for business financing, especially if you will use it to grow your business and help clients.

What PO financing can - and CAN'T do

2010-06-09T07:16:00.000-07:00

Here is a short article to tell you what can and can't be done with purchase order financing.

What you can do:
1. Use it to pay suppliers for finished product
2. Use it to grow your re-seller business
3. Handle large orders form credit worthy clients
4. Use it for product sales

What you can't do:
1. Use it to cover your own manufacturing expenses
2. Use it to cover payroll and other office expenses
3. Use the funds for anything other than paying your direct suppliers

Although purchase order financing is very flexible and works well with small companies, it can only help a businesses that fall within this very narrow definition: companies that buy goods from other companies and re-sell them without any modification to other commercial clients. In other words, it helps resellers and distributors.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Clothing Retailers Show Better Numbers

2010-05-20T08:02:00.000-07:00

It's well know that the garment industry has always had a close relationship with factoring. However, in the recent years, it's developed a close relationship with the purchase order financing industry as well. This is because many clothing items are now imported - and po financing is a major import financing tool.

According to the WSJ, a number of clothing retailers are reporting some decent numbers. We'll need to see how these numbers hold up, but they seem to indicate things are getting better. I think we are going through a funky time (for lack of a better term) in this recovery. Things are starting to look good.... and people are still asking whether the growth is sustainable. We hope it is...

No Rushed Deals Here

2010-05-13T14:31:00.000-07:00

Like most people in the industry, I get the occasional call from a prospect that needs purchase order financing "urgently" - in a rush. We pride ourselves of doing things efficiently and quickly - but I am always concerned when I get a call from a prospective client that tells me s/he has 4 days to get the deal funded or it's lost.

Usually, I decline those opportunities.

The overriding reason why I decline them is that it's hard to predict how quick the due diligence will be. It may be fast if everything checks out. It may be slow if we are missing information or if things don't check out. But we never know until we start.

Ultimately, we may end up with a disappointed or upset client if things don't go quickly or as planned. And we can be certain, that when people are rushing things, things have a higher chance of going wrong.

Weather you are looking for purchase order financing (or factoring), you are better of planning ahead and getting your financing lined up before there is an urgent need. It will prevent you from making rushed decisions when selecting your financing company, or making any rash decisions about a transaction.

---
Looking for business financing in Missouri? Learn about factoring Missouri and invoice factoring Missouri.

Contradictions...

2010-05-06T08:02:00.000-07:00

In my business, the subject of risk comes up on a regular basis. Yesterday I told you a story about prospects that tell me that their business has no risk at all. Today I will tell you a story about contradictions. This is a generic story but I hear it a few times a year:

---
It usually starts with a prospect that needs purchase order financing (or factoring). The prospect makes a very passionate case when presenting the transaction and insists that their customer is a good customer - they always pay like clockwork. No risk to us, they say (literally). The last phrase always raises my level of concern.

The discussions progress normally and then come to a GRINDING HALT when prospect realizes that s/he is liable if their customer does not pay. "What?!?", they say. They then make a passionate case that if the customer does not pay, it should be our risk, not theirs. Apparently, they think we should take that risk because we are (presumably) going to finance the transaction...
---

I can see why people look to shift risk. We all do. What makes this type of situation interesting is that the prospect is usually defending the transaction saying (passionately) we should do it because it's risk-less...and then gets upset when they are unwilling to take the risk of the risk-less transaction they propose. The emotional shift is interesting to watch.

As I have said before, the only risk free asset is US Government T-BILLS. All other assets or transactions have risk.

Ultimately, transactions like this one never get funded. Why? Because prospects that believe their transactions have no risk tend to also have unrealistic expectations about everything.

By the way, there is a way to reduce the risk of non payment by a commercial customer. It's a product called Trade Credit Insurance.

---
Learn about business financing in Michigan.Information about factoring in Michigan and invoice factoring in Michigan. More information about Marco Terry.

Factory Orders Jump - More Good News

2010-05-04T08:29:00.000-07:00

I mentioned in my last post that manufacturing seemed to be improving. Today, the WSJ posted an article about the jump in factory orders. Although most agree that the economy is not healthy (not yet!), it's certainly recovering. It may be a slow recovery - but a recovery nonetheless.

Even though we are in a recovery, getting conventional business financing is still pretty hard. Most institutions are being extremely cautious and only making business loans very very selectively. Because of this, demand for alternatives like purchase order financing will remain strong. Most purchase order financing companies are comfortable taking on higher risks than conventional financing institutions.

Also, purchase order financing is tied to consumer spending. This is because many retail suppliers who import goods, use purchase order funding. And, consumers are still spending a large portion of their incomes. Here is a post from the Planet Money blog about consumers are not saving a lot (thus, they are spending)

---
Looking for business financing in Maryland?Learn about factoring in Maryland and Maryland factoring. More information in the factoring blog.

Improvements in Manufacturing

2010-04-27T07:50:00.000-07:00

This is a very short post. Both Caterpillar and Whirlpool delivered strong results, according to the WSJ. The article quotes an executive saying that during the crisis they saw demand plummet, then flatten and now it seems to be going up. Although two companies don't make an industry, this may be a bellwether of things to come.

It seems that lately we have seen a growing crop of good news about business. Let's hope this continues.

---

Looking for business financing in Maine?Learn about Maine factoring and invoice factoring in Maine.

Why Housing is Important to the Purchase Order Financing Industry

2010-04-23T09:16:00.000-07:00

The housing market seems to be creeping up - slowly. I think most people would say that this is good for the whole economy. It's also very good for the purchase order financing industry, albeit indirectly. A large percentage of po financing clients tend to be suppliers to the so called big box retailers. There is a correlation between PO financing growth and retail growth.

Although retail sales have been surprisingly strong this is probably not sustainable unless housing recovers. Most individuals have a large portion of their wealth (and/or debt!) tied to a house. People saddled with homes that have depreciated in value still need to pay for them. They are usually stuck with the home, unable to sell it. Of course, this is good for the note holder (a bank or the "giant pool of money"). Not for the individual consumer though that hold the over-valued house. Why? Because presumably they'd be paying less - a lot less sometimes - if they had bought the house later (or if they rented). They see the big payment to the note holder as "wasted money". This gets complex because the "wasted money" is the note holders' profit/gain.

The economic ramifications of housing values are very complex. Few people truly understand them all. Unfortunately, I must admit I am not one of them. But what I do understand, is that a customer that is saddled with debt and with little disposable income is less likely to buy stuff..... and that's not good for the po financing industry.

---
Learn about factoring and invoice factoring. Additionally, here is some information about business financing in Kansas and invoice factoring in Kansas and Kansas factoring financing.

Why are Gross Margins Important?

2010-04-21T09:16:00.000-07:00

Usually, 3 minutes into a conversation with a prospect I will ask about their Gross Margins. to many prospect, this is a personal question and are usually a bit shocked when I ask. But there is a good reason for asking. The gross margin of the transaction is very important in purchase order financing. There are two reasons why we think this is the case:

1. Transaction Safety
We view Gross Margins as a safety cushion that allows for things to go wrong without wiping out our client. Things that can go wrong include late deliveries and product spoilage.

2. Transactions Profits
In finance we use the concept of risk/reward. Basically, the riskier the transaction the higher the reward (or cost of financing). We consider po financing transaction to be much riskier than factoring transactions. This increases the cost. Since we want our clients to have an ample Profit Margin, most po financing companies will only finance transactions that have a gross margin that exceed 15%. This concept often confuses prospects because they are always convinced that their transactions are extremely safe. I will have to disagree. All transactions have risk - which is why the risk free rate in the US is tied to T-Bills.

---
Looking for business financing in Indiana?Learn about factoring Indiana and invoice factoring Indiana. You can also check out the invoice factoring group blog.

The Importance of KIR (Keep It Real!)

2010-04-17T15:32:00.000-07:00

They say that entrepreneurs should be confident, positive.... optimistic. Sure, I buy that. But one of the most obvious red flags, at least for me, is when I am on the phone with an entrepreneur that is OVERconfident, OVERpositive...... and OVERoptimistic. These traits usually point to an entrepreneur that is not very experienced.

We prefer entrepreneurs that are cautiously optimistic, who show us how they are planning for the best to happen while having a solid contingency plan in case it doesn't happen. As we all know, business deals seldom happen according to plan.

If you are looking for business financing and are presenting your plans to factoring companies, I'd suggest that you present your growth expectations calmly and without hyperbola. This is especially true if you are looking for purchase order financing. Most companies looking for PO financing tend to be start ups with entrepreneurs full of vision but many times thin on accomplishments. It will gain the trust of your funding company.

---
Looking for business financing in Hawaii? Learn about factoring Hawaii and invoice factoring Hawaii. Check out the new Canadian factoring blog.

Single Supplier vs. Supplier Chain

2010-04-09T14:21:00.000-07:00

The ideal purchase order financing transaction involves three one's. One supplier, who sells the goods to One Re-seller (our client), who sells the goods to One Customer. Why do PO financing companies prefer this type of transaction? Well, because it's simple. They pay the single supplier and the transaction ends when the single client pays.

Life is seldom simple, though.

It's not unusual to have a transaction with more than one supplier. Some of these can be done - others can't.

What CAN (usually) be done:

If you have an order for a number of products, and there finished products have to be ordered from multiple suppliers you may be able to finance your order if (and only if) your customer is willing to accept and pay for partial deliveries.

Why must your customer be willing to accept and pay for partial shipments? Imagine what happens if one of your suppliers fails to fulfill the order. You'd be stuck with the partial order and without the ability to get paid for it.

What CANNOT (usually) be done:

Same scenario as above but instead of one supplier, you have a supplier chain. You have a supplier chain if you are using a series of third party suppliers, who sell you parts that have to be then assembled into a final product. In other words you have supplier dependencies - suppliers who depend on the performance of other supplier. If your transaction has these dependencies, chances are that your order will be close to impossible to finance.

This may seem very inflexible. But there is a reason for the inability of po finance companies to fund these types of orders. Imagine what would happen if one of your suppliers fails? It can be a parts supplier or the assembly supplier. Either way, you end up with unfinished or shoddy product. However, the purchase order funding company will still have to pay the suppliers that performed well. Basically, they are out of money (paid to some suppliers) with no product for you to sell. This is just too risky. Other business financing solutions, such a business loans may work though.

---
Looking for Connecticut business financing? Learn about factoring Connecticut and Connecticut invoice factoring. Learn more at the factoring blog.

Purchase Order Financing Basics

2010-04-04T05:28:00.000-07:00

PO financing seems to be a misunderstood from of business financing. Contrary to what it's name might imply, it's a fairly narrow for of funding. However, there are instances where purchase order financing can be a smarter alternative to a business loan.

Who can PO Financing Help?

First, purchase order funding is designed specifically to help resellers buy products to fulfill purchase orders. It can only work when the client is purchasing goods and re-selling them without any modification, alteration or re-manufacturing. In other words, the client buys product A from his supplier and sells product A to his client (at a mark up). Sometimes, po financing can also be used by companies that use third party manufacturing. But these opportunities can be complicated to fund if they have more than one supplier.

How is the Transaction Structured?

The structure of a purchase order financing transaction is very simple. Once you get the order, the purchase order financing company pays your supplier, who then delivers the product. This is a key difference between business loans and po financing since you don't get the funds - your supplier does. The transaction is completed when your client pays for the products. Payment is sent to the purchase order financing company, who does the settlement.

Here is the typical client profile for companies that use invoice factoring or purchase order financing.

---
Looking for business financing in Colorado?Learn about factoring Colorado and invoice factoring Colorado.

Why you Care about the House Price to Rent Ratio

2010-03-19T09:02:00.000-07:00

I recently heard of a blog called Calculated Risk. They had a very interesting post about the House Price to rent Ratio. Wait! This is a trade financing blog. Why am I talking about a real estate measure? Simply, because many of our purchase order financing clients sell their goods to big box retailers - who then sell it to consumers. And, consumers care about the Price to Rent ratio, even if they don't know about it.

According to Wikipedia, the ratio basically "how much the buyer is paying for each dollar of received rent income". I interpret the data as meaning that renting is cheaper than buying. So, many homeowners are paying more in living costs than they should (if the economy where "efficient"). Sure, it's a simplistic interpretation but I also think it happens to be reasonably accurate. If you don't believe me, check out the Miami real estate market.

More money spent on housing means LESS money spent buying other things - especially luxuries. And here is where some in the factoring and purchase order financing industry will get hit.

p.s. - Why this pircture? "Se Renta" means "For Rent" in Spanish :-)

---
Looking for business financing in Arizona?Learn about factoring in Arizona and Arizona factoring financing.

Negative Company Equity and PO Financing

2010-03-09T08:13:00.000-08:00

Thanks to the so called great recession we are seeing demand from companies that have negative equity. Basically, they have more liabilities than assets. The problem with financing companies with negative equity is that they have a high risk of bankruptcy.

Client bankruptcy is one of the biggest fears of any purchase order financing company. Obviously, companies that have negative equity are at a very high risk of bankruptcy. This is why most po financing companies shy away from these opportunities.

Getting business financing is not necessarily impossible. But you can expect to have to present a solid plan that will show how your company will emerge from problems. If your company is at this stage, you should consider getting some financial advice from a competent adviser - ideally someone who is familiar with turn-around situations.

---
Looking for factoring in Saskatchewan? Learn about factoring in Saskatchewan.

Business in Turbulent Times

2010-03-04T07:56:00.000-08:00

I recently wrote about the risk of a double dip recession and on surviving a nasty recession. This week, most news articles seem to be more positive. We have jobs claims dropping and strong retail sales. Are we back to happy times?

One week, things are up and everything looks good. The next week, everything sinks and things look bad. It's been like that for those of us in purchase order financing. Many of our clients do business with retail chains so we are very sensitive to that industry. All we have at this point is a lot of contradictory information and limited guidance on the future.

So, what can we do? I opt for being conservative in both my analysis of the situation and my reactions to it. This recovery will be in fits and starts, it will go up, down, sideways, then up again. Basically, impossible to predict. Thus, I prefer to manage my expenses like a hawk but invest in sales and marketing.

---
Looking for factoring in Prince Edward Island? Learn about invoice factoring in Prince Edward Island.

Double Dip Recession a Possibility - What to do?

2010-02-26T07:51:00.000-08:00

There is a lot of buzz in the press on the risk of a double dip recession. These fears are in part because we have conflicting economic indicators. Some look good. Others look bad. Some look really bad (employment). I tend to be cautious by nature and I think it would be wise to start preparing our businesses for another dip, or at least for a prolonged "flat" recovery.

So, how you you prepare to live to fight another day? There are some basics things you can do:

1. Invest in your company carefully - research the need for every expenditure.

2. Don't under-invest in marketing. I am a big believer in investing in marketing and sales while things look bleak. Just me.

3. If you think your company will need business financing this year - try to get it sooner rather than wait for it (but consult your financial expert!)

Item #3 is very important. We can assume that getting a business loan (or any form of financing like purchase order financing) will become more difficult if the economy does not improve. Therefore, getting your financial ducks in a row - sooner - rather than later will be very important. You should gather up all your financial data and discuss this with your financial adviser, CFO or CPA.

---
Looking for factoring in Canada?Learn about factoring in Nova Scotia and invoice factoring in Nova Scotia.

Getting Business Financing is Tougher.... But doable.

2010-02-24T14:13:00.000-08:00

Ready? Set. Wait! That's what most companies that are looking for business financing hear nowadays. Most financial institutions have become very conservative (rightly so) and do a lot of due diligence and thinking before financing any opportunity.As many have found out - the financing moves like a pendulum. A few years ago it was very easy to get it. Now the pendulum has swung and getting a business loan is hard.

One important and often overlooked key to getting your application approved is making a good first impression. And to do that, you have to prepare. There are two key areas where this matters:

1. The first call: Be sure to know your business inside out and prepare by generating a list of possible questions/answers that the business financing company is likely to ask. And remember the three P's. Be Prepared. Be Professional. Be Punctual..

2. The Application: Your application is the first thing that the due diligence team will usually see. Believe it or not - looks matter. If your application looks professional and well done it will get better consideration than one that is sloppy. Most due diligence folks will probably deny this - but it's psychology and it's true. Now, I am not saying that looks alone will get you anywhere. But it will help your application get noticed, especially if your financials are reasonably strong. Here is more information about financing applications and financial statements.

---

Looking for factoring in Canada? Learn about purchase order financing and factoring in Newfoundland and factoring in Labrador.

Financial Jargon 101

2010-02-23T14:45:00.000-08:00

This will be a quick post where I will depart from the traditional subject and focus on good old financial jargon 101. Last week, the Federal Reserve announced that they would raise the discount rate.

Many people confuse the term discount rate, fed funds rate and prime rate. Since these are important, I figured I'd try to explain them.

1. Fed Funds Rate: The rate at which banks (or depository institutions) usually use to lend money to one another. These transactions are usually done on a nightly basis. Go here for the current fed fund rate.

2. Prime Rate: This is the rate at which banks will lend money to their most favored customers. This is determined by surveying certain banks. Go here for the latest WSJ prime rate.

3. Discount rate: This is the rate at which eligible banking institutions can borrow money from the federal government. Go here for the latest discount rate.

These are thee common terms that are mentioned in the financial press on nearly a daily basis. Most other rates are based on these rates. For example, some financing companies fund their operations by using bank financing. Their loan will usually be based on prime rate. So the prime rate affects their cost of funds, which ultimately affects the price they charge their customers.

More on the benefits of purchase order financing on my next post :-)

---
Looking for purchase order financing in Canada? Learn about factoring New Brunswick and invoice factoring new Brunswick.

Why Do PO Financing Companies Require Financial Statements?

2010-02-22T08:08:00.000-08:00

Most (if not all) purchase order financing companies will ask that clients submit a set of recent financial statements with their application. For some reason, 20% to 30% of prospects always object to this request. I know I am not alone because I have heard many colleagues gripe about this issue.

The most common objections we hear are:

1. We are a startup - we don't have/need financial statements
2. My CPA handles those..... and he has not made them in a long while
3. Our accounting system is not up to date
4. We don't use financial statements - they are a pain to make

Now, look at this list. Imagine what's going through the mind of your business financing company representative when they hear any of these explanations. It's not good. I know that I always cringe and get a feeling that the company requesting po financing is not very well organized. It's probably being run by someone who is relying on their memory and some bank statements.

While not having financial statements may work for some small owner-operated-and-run businesses, it wont for larger companies. It won't cut it for your financing company either.

A well run company - even a small owner operated business - but use financial statements as a tool to determine important indicators:

1. Profits centers
2. Cost centers
3. Inefficiencies

Purchase order financing companies need to look at these statements to determine their risk and to make sure they invest their funds wisely.

Most modern small business accounting packages (like QuickBooks or Peachtree) are simple to use and can generate good financial statements with a few simple keystrokes. If you don't know how to use them, consult a CPA. Most will help you for a modest fee.

---
Looking for factoring in Canada? Learn about factoring in British Columbia and British Columbia invoice factoring.

How to get business financing - if you have bad credit?

2010-02-19T07:49:00.000-08:00

Not too long ago, I read some advice that was posted on a blog. Someone had asked for advice on how to get business financing in light of the fact they had bad credit. I was surprised to see that the expert answer was to sell the company to a friend/spouse with good credit, get financing and then have the friend sell you the company back to them.

Personally, I think this is a dangerous strategy. Before going into why, let me ask you. Does this sound like a good thing to do? Specifically, if you were the one providing the funding, would you be ok if someone did this to you?

This is why I think it's dangerous, and possibly naive, to try this:

1. This is the oldest and most well known trick in the book. Your business financing institution will usually do their due diligence before providing the funding. If they find that the company was recently sold they will usually ask a lot of questions and unravel this quickly.

2. I always advocate honesty. Having bad credit is difficult but being honest, in my opinion, is always a good policy. It won't be easy. Sure, some business loan companies may decline you. But there are many who appreciate and value honesty and can be willing to give you a break. I know for a fact, we have done that many times ourselves.

3. There is a chance your friend will have to sign a guarantee. The current business financing environment is very tough and many institutions are asking for personal guarantees from owners. If your friend has to sign one, their fate will be tied to the business you sold them. They many not want to go through with the financing.

4. It could create tax complications. You and your friend will need to consult a CPA to address how to report the quick sale and purchase back of a business to the IRS. I suspect, it will require lots of expertise and some paperwork.

5. Let's hope your friend is willing to sell the business back to you. No guarantees that your friend will sell it back to you. Good luck taking them to court if they don't.

6. Many financing contracts address this scenario. Lastly, many contracts have clauses that make the financing line contingent on the new owners also being approved by the insitution

Here is the tough answer to this question. It may be difficult, or even impossible, for a business owners to get a business loan if their (or their business) credit is bad. Period. You will usually be better of by being honest and upfront, and by trying to solve the situations that caused the bad credit in the first place.

Note: This article expresses only my opinion and it is not intended to be legal, financial or business advice. For advice, please see a qualified professional.

---
Looking for business loan financing in West Virginia?Learn about invoice factoring in West Virginia and factoring West Virginia.

Purchase Order Financing - Government Suppliers

2010-02-17T09:33:00.000-08:00

We have seen a number of small businesses that are being created specificaly to supply products and services to the US government. For many, it's a good strategy since the US government is a great customer. They always pay their invoices on time.

However, they also place large orders. Companies that don't have the financial wherewithal to handle them, usually resort to purchase order financing or government contractor factoring. Both products share a common advantage - the amount of financing is determined by:

a) The quality of the invoice payor
b) The size of the order

The US Government has excellent credit and places large orders. Because of these advantages, many government suppliers are able to purse larger orders and bag in more revenues.

---

Interested in business loan financing in Vermont. Learn about factoring Vermont and invoice factoring Vermont.

Self Employment and Purchase Order Financing

2010-02-16T14:56:00.000-08:00

A recent blog article mentioned that many self employed are incorporating. From a business financing perspective, this is probably something to be considered. Many business financing companies will not offer funding to unincorporated businesses. This has to do with the fact that personal and business liabilities can easily get mixed and generally shows an unsophisticated business owner.

Now, bear in mind that incorporating (or forming an LLC) is no guarantee that you will get financing. However, most funding companies are now requiring it. As a matter of fact, all the small business factoring companies that I know demand it, especially in this economic environment. Small business factoring companies are not a lone though - most factoring companies that I know (large and small) require it.

Disclaimer: This is not to be considered legal or financial advice. I am not an attorney.

---
Looking for business loan financing in Texas?Learn about factoring Texas and invoice factoring Texas.

Pay when Paid and Purchase Order Financing

2010-02-10T09:09:00.000-08:00

I recently wrote about the subject of pay when paid as it relates to invoice factoring. "Pay when paid" is something that crops up in the world of purchase order funding fairly regularly as well. The scenario is fairly similar to the one in factoring though.

Basically a reseller gets a large purchase order and tries to use po financing (learn bout po financing benefits) to fund the order. However, the PO states that the reseller will only get paid once (and if!) their client is paid themselves. There are many things that can go wrong with these, some of which were outlined in the prior post.

Ultimately, we (and most of my competitors) will not finance those transactions because of the risk of non payment. Pay when paid can be a deal killer - at least for us.

---
Learn about business loan financing in South Dakota. Or get information on factoring South Dakota and invoice factoring South Dakota.

Prepaying Foreign Suppliers in Cash

2010-02-09T08:04:00.000-08:00

One very common scenario is to have a client request that we prepay their foreign supplier in cash - rather than with a letter of credit (or cash against documents) which is our preference. Many prospects are often disappointed when we tell them we cannot prepay their suppliers by wire transfer.

There is a very logical reason why we do this. That is because if something goes wrong, we have no recourse against the foreign supplier. If they do something wrong - or worse ship no product - the only recourse we have is to sue in their own country. That is always a losing proposition.

Now, think about it this way. If we prepay for goods in cash we are basically giving the foreign supplier the equivalent of an unsecured business loan. Why would we do that? Especially, when our area of expertise is purchase order financing - not "unsecured cash loans to suppliers in distant lands".

---

More about business loan financing. Interested in business financing in Pennsylvania? Learn about factoring Pennsylvania and invoice factoring in Pennsylvania.

Hiding The Truth - And Searching for It

2010-02-03T07:45:00.000-08:00

Years ago, when I first started my career in purchase order financing, I was evaluating a prospect and I asked him if his business taxes were OK and up to date. His answer was "Don't worry, we have a CPA handling all our taxes". I initially took her answer at face value but felt uncomfortable with it later that evening.

The next morning, I asked the prospect for permission to speak with her CPA and ask questions. "Go ahead", he hesitated. "I'll give the CPA a heads up".

I called the CPA, who tersely informed me that he would answer anything I ask, but could only answer Yes or NO questions. He was not willing to volunteer anything. That was a bad sign. And pretty creepy too. I was able to find - by asking 4 question - that the prospect had serious tax problems and was facing a criminal inquiry. Needless to say, we declined the deal.

That prospect answered my initial question with a weasel answer. Not technically a lie. But clearly trying to deflect being straight forward from the get go. I am surprised he let me speak with her CPA rather than declining to proceed.

Most people in the business financing industry deal with weasel answers everyday. Not as blatant as the situaiton I just described - but weasel answers nonetheless. Personally, I value prospects that provide direct answers, even if they think they are not what I want to hear. Many times we can work with challenges - such as liens and judements - if we know of them ahead of time. Being direct about a major issue shows honesty and willingness to work - in my view.

Whenever I find myself dealing with someone that gave us a weasel answer (i.e. deflected a question or hid information) I find myself double checking everything I do. Why? I have no idea if previous answers or information was also incomplete, thus we move cautiously and start asking lots of questions. It's only good dilligence to do so.

I can't speak for everyone, but I suspect anyone that offers any finance product (a business loan, factoring, invoice financing or other) has a similar view. In my humble view - honesty is a good policy.

---

Looking for business financing in North Dakota? Learn about factoring North Dakota and invoice factoring North Dakota (or general factoring).

Is the tide turning? Personal incomes are up.

2010-02-01T08:04:00.000-08:00

In my other blog, I wrote about the effects of the rise of the national GDP and the relation to the factoring industry. Today, we get news that personal incomes and consumer spending also rose. Sure, both of these events are probably related, and as many economists state, this happened because of a whole bunch of "one time" events. For example, a large part of the personal income growth was due to a one time social security payment.

Ok. Sure. A whole bunch of "one time events" perhaps, but a good combination nonetheless. Although economists are not predicting robust growth this year, they are predicting growth. I am not saying that we should all jump up and uncork the Champagne but this is good and could potentially kick-start some areas of the economy.

How will all of this affect the purchase order funding industry? Positively, I expect. Purchase order financing is all about financing inventory that is in transit from the supplier to the end customer. Companies can only keep lean inventories up to a point - otherwise they start affecting revenues and profits. So, some will start purchasing goods.

The current situation may help those in our industry. Many companies will be unable to get a business loan just because credit is hard to come by these days and will need an alternative source of business financing. PO financing is one of such alternatives.

---
Need business loan financing in New Mexico? Learn about invoice factoring New Mexico and factoring in New Mexico.

Combining Purchase Order Finaning with Bank Financing

2010-01-27T09:09:00.000-08:00

When banks or institutions give you a business loan they also file a UCC lien securing their collateral. Usually, one of the items they ask for as collateral is Accounts Receivable. This is very common for most business financing transactions.

This usually kills your chances of getting purchase order financing. Purchase order finance companies will also need first position on your accounts receivable which the business loan is already claiming as collateral.

Why is this? If you think about it from a purchase order financing perspective, the actual "collateral" is the invoice that is generated by the order that they fund. Usually, the bank will not relinquish their position and the deal dies...... unless the stars align correctly.

One way to handle this situation is to see if the bank is willing to subordinate certain purchase orders, to be funded by the po financing company , who in turn is taken out by the bank when the order is delivered an invoice is generated. It's a bit tricky but it can be done in certain circumstances.

The net effect is that the purchase order financing company funds the inventory purchase and then the bank funds the A/R component. This can be important because many business loans have covenants covering inventory percentages. If structured correctly, this can work to the banks benefit.

Don't get me wrong - pulling this off is not easy. Your financial institution will probably have you jump through a couple hoops before approving this type of a transaction - but it's possible under certain scenarios (too complex to describe here).

Note: this article should not be construed as financial or legal advice.

-

Looking for business financing in New Hampshire? Learn about factoring in New Hampshire and Invoice Factoring New Hampshire.

The Slow Recovery

2010-01-25T09:03:00.000-08:00

The Miami Herald had an article titled "Slow recovery continues." What's interesting is that if you get past the headline, the news is not that bad. For starters, business spending is expected to go up. This will benefit many purchase order financing companies that sell business supplies. This will also trickle into LESS job loss and perhaps even a small job GAIN.

One thing that caught my interest is that the article said also that prices were starting to increase. This can mean many things. On the positive side, it could mean there is enough confidence in demand. Lets not forget that many companies have had to SLASH prices. Alternatively, it could mean that inflation is arriving. I think it it's probably the former. Businesses have been slashing prices so they are now recouping a little bit.

Now, let's all hope for a recovery that grows at a sustainable rate.

Looking for business loans in Montana? Go here to learn about the alternative, factoring in Montana and invoice factoring in Montana.

Massachusetts State of the Economy

2010-01-22T09:01:00.000-08:00

The Boston Globe, in my former state of Massachusetts has released a state of the economy piece. This is somewhat similar to what was done in Florida (read about the Florida outlook here). I am sure many major newspapers are doing this. It is a very well done piece. Unfortunately, the main theme is Jobless Recovery. At least they are not using one of my most hated terms - job LOSS recovery.

With all these bad news - is there a glimmer of hope? Yes, according to the federal reserve publication. It's just that we are going through a period of turbulence with lots of ups and downs. Fasten your seat belts......

Looking for factoring in Mississippi? Learn about business financing in Mississippi and factoring in Mississippi.

No Experience - That Could Spell Trouble

2010-01-22T08:35:00.000-08:00

We get a lot of start ups that are looking for business financing. Many of these are created by seasoned veterans who just want to hang their own shingle. Others, are created by people with a dream.... and little else. No experience whatsoever.

Many believe that purchase order financing companies only focus on the strength of the purchase order. They are wrong. They also focus on the clients ability to deliver the purchase order. Clearly that's a key piece of the puzzle.

If you start a company and need funding, unless you have experience yourself, you'd be wise to consider working with some experienced people (either by hiring them as employees or advisers, whichever works best for you). Otherwise, you risk not getting the funding you need.

-

Looking for business financing in Michigan? Go here for information on factoring Michigan and invoice factoring in Michigan.

In Purchase Order Financing - Timing is Very Important

2010-01-20T08:04:00.000-08:00

One very common reason purchase order financing transactions fall through is bad timing. Many times I have seen professional, competent business owners blow a transaction because they could not keep track their time frames.

Here is a story about a deal that went bust about 6 months ago. Some details have been changed to make this a fictional story, but the lesson remains.

A business owner had started a new company and was looking for purchase order financing They were hoping/expecting to get a $1,000,000 government order in about 4 weeks. We explained the process to him and it seemed to be a very good fit. We also explained that we can process individual purchase orders rather quickly, but setting up the initial account takes about 3 weeks. We suggested that they promptly submit an application to ensure that the proper financing was lined up should he win the transaction.

We did not hear back from this prospect until a month letter. He announced that the had just won the PO, which had an aggressive time frame. The supplier needed to be paid in two days and the goods delivered in two weeks.

Now, even in the best of cases, setting an account takes a minimum of one week. We prefer to budget for three weeks because life is seldom perfect. The client was advised that we would not be able to fund this transaction due to time frame issues , but would be happy to work on the next transaction.

The client looked for business financing in many other places but could not find someone willing/able to fund this transaction. Ultimately it fell through. To add further problems, he defaulted on a government order which is never good.

By the way - we would have loved to fund the purchase order. We declined because we knew, from experience, that we would not be able to live to the clients expectations. Now I ask this to all readers?

Is it reasonable to expect 1,000,000 in a few days, without having the financing company do any due diligence? Would you fund it? (if you answer yes, please email me your phone number!)

Taking the time to line up financing prior to winning the order was key to the success of this transaction.

It's unfortunate that this is not an unusual event. We see this daily. It's also very preventable. Just follow this simple rule:

'Don't sell any products unless you have the funds (or financing) to pay for product. Otherwise, you risk losing the transaction, your customer and your business'

Looking for business loan alternatives in Maine? Find out about factoring in Maine and invoice factoring in Maine.

The Real Misery Index

2010-01-18T08:49:00.000-08:00

When it rains it pours. I recently posted a short blurb about the US Misery Index. Well, I found that the Huffington Post has calculated what they refer to as the real misery index

I don't know which one is better, but it would seem that the Huff Post's index does a better job at comparing the magnitude of misery from the last recession and this one. I find it an interesting calculation.

Looking for business financing in Kentucky? Learn more about factoring in Kentucky and invoice factoring in Kentucky.

Purchase Order and Invoice Verifications

2010-01-18T08:21:00.000-08:00

I recently wrote about the importance of verifications in invoice factoring programs. Most purchase order financing programs have similar - if not more stringent - verification programs.

In factoring, the company needs to verify that the invoice is correct and will be paid. In purchase order financing, the company needs to verify that BOTH purchase orders AND invoices are correct and valid.

This means that the company has to verify that:

1. The purchase order is correct and final
2. The actual PO numbers
3. The PO contractual terms

And then (unless a factoring company handles the A/R part of the transaction), the company needs to verify:

1. That once the order is fulfilled and a valid invoice is created
2. That the invoice is accurate and payable

This is the main reason that most professionals say that purchase order financing is a "hands on" process. However, the other side of the coin is that po financing is very flexible and available to small and growing companies.

Are you looking for business financing in Kansas? Learn more about factoring in Kansas and invoice factoring in Kansas.

The US has a Misery Index

2010-01-16T05:15:00.000-08:00

I find it somewhat funny (and interesting) that the US has a Misery Index. It basically adds unemployment + inflation. It stands at 11.84. I find it interesting that someone is trying to peg a number to "Misery". Probably not very accurate, but still, the site is interesting to read.

--

Looking for business funding in Indiana? Learn more about invoice factoring in Indiana and Indiana factoring companies.

Want a HELOC to finance your business ? Good Luck

2010-01-14T07:00:00.000-08:00

Many entrepreneurs and business owners have funded their businesses by getting a home equity line of credit (HELOC). Needless to say, the current real estate implosion has affected the ability of owners to get a HELOC. I suspect that banks are only providing HELOC's to owners who have a lot of equity in their homes as well as lots of other assets. Or in other words, they are only providing funds to those that don't need them, as it's commonly said :-) The fact that foreclosure is a problem for many individuals and has reched epic proportions is not helping matters either.

If I were a betting man (I am not!) I would estimate that getting a HELOC will be difficult for a number of years, especially in hard hit markets like Florida, California and Nevada.

During boom times it was common to see factoring and purchase order financing prospects walk away from term sheets and get a HELOC to fund their business or transaction. I don't think we will have that scenario repeating itself, a least for a little while.

Looking for business loan options in Georgia? Find information about invoice factoring in Georgia and factoring financing in Georgia.

Why does PO FInancing Require High Gross Margins?

2010-01-14T06:33:00.000-08:00

You have probably heard that purchase order financing companies usually get involved in transactions that have a minimum average gross margin of 20% (this number fluctuates a little bit).

Why is this the case?

The answer is simple. The purchase order finance company covers the Cost of Goods Sold (COGS) of the client. The Gross Margin ( which is the the (Sale - Cogs)/ Sale) must be able to cover:

1. The business owner's profit
2. The purchase order financing fee
3. Any incidentals such as breakage, disputes, delays, etc.

The biggest unknown of the three items is "incidentals". Entrepreneurs and business owners can sometimes be excessively optimistic about the capabilities of their suppliers. The cold hard reality is that many times, things go wrong. Sometimes, they go spectacularly wrong. Working with transactions that have an ample gross margin protects both clients and purchase order financing companies by increasing the chances that any incidentals will be covered out of the gross margin.

Are you looking for business loan alternatives in Florida? We can help you find factoring in Florida. Go here for invoice factoring in Florida information.

Purchase Order Financing in Canada

2010-01-13T09:15:00.000-08:00

Purchase order funding has been gaining quite a bit of traction in Canada. It is a niche product that is mostly offered by a few specialty finance companies (and a couple of factoring companies). We have discussed the basics in other posts, but in summary, purchase order financing gives you funds to pay your suppliers so that you can fulfill orders.

Some product restrictions include:

1. Profit margins must be at least 20%
2. You must be a reseller of finished goods.
3. The order cannot involve any customization/installation tasks

There are some other important details about how purchase order funding works, but these are a good start. You can find resources on purchase order financing and learn about the benefits of purchase order financing by going here.

Looking for business financing in Colorado? We are a leading provider of factoring in Colorado. For information about factoring and purchase order financing in Colorado

Purchase Order Funding - More Resources

2010-01-12T08:28:00.000-08:00

I have posted some resources on purchase order funding. There are some additional resources out that that we wanted to share. Most of these purchase order funding resources are articles that describe how po financing works and how it can be used in certain transactions.

So, if oyu are researching purchase order funding for a transaction, or just looking to learn more, you have come to the right place.

Articles:

1. What is purchase order financing?
2. Purchase order financing basics
3. Purchase order funding - distributors and wholesalers
4. Purchase order financing for resellers and trading companies

There are a whole bunch of resources available on the internet, but these are certainly a good place to get you started.

Trade Gap is Up - Good for PO Financers?

2010-01-12T08:15:00.000-08:00

A recent article mentioned how the trade gap has ballooned. There are many reasons for the increase, but a large part of it has to do with the price of oil.

Most purchase order financing companies make their living financing import companies. So, one could argue that a trade deficit will have a positive effect in the industry. I'll repeat though - I am not saying trade deficits are good. Actually, most people agree that a trade deficit is not a good thing, especially in the long term.

But there is a catch though. Oil, the product that happens to be driving a large part of the imbalance, is not the type of product that is financed with purchase order funding very easily. There are a few reasons for this. In no particular order, they are:

1. Transaction profit margins
2. Volumes
3. Involved parties

Most will agree that while oil trading transactions have substantial volumes, they have very low margins. It is a commodity after all. That in itself, usually kills the chances of using purchase order financing. We'll talk about the other items, some other time.

---
Looking for business financing in Arizona? We can provide information about factoring financing in Arizona. We are a leading invoice factoring company in Arizona.

China Becomes the #1 Exporter

2010-01-11T07:01:00.000-08:00

This morning I heard on NPR and also on the WSJ that China had become the #1 exporting country, getting ahead of Germany. Many purchase order finance companies have made a substantial business by funding US and Canadian companies that import goods from China into their respective countries.

This does not necessarily affect the industry at this time, but it's an interesting fact to know.

---
Looking for business financing in Alabama? We can offer purchase order financing and factoring in Alabama. Learn more at factoring in Alabama.

Purchase Order Financing - Resources

2010-01-08T06:26:00.000-08:00

As I mentioned in my other blog (invoice factoring blog) a number of readers just come to this blog to learn more about purchase order financing - basically because they are wondering if it will help their company. We have a purchase order financing resource area with a number of articles that can help. Here is a few of them:

1. What is po financing?
2. Growing your import business with po financing
3. Using purchase order financing to fund your big sale
4. Unlimited sales - How PO Financing can help

There are additional resources for purchase order financing at the site, but these articles are a good start.

---
Looking for information on purchase order financing? Read the purchase order finance blog

CES - Off to a Good Start

2010-01-07T14:04:00.000-08:00

Apparently, the Consumer Electronics Show is off to a good start. The show opened today.

What does this have to do with purchase order financing? More than you think. Many purchase order financing companies focus on wholesalers that sell products to big box retailers. Many of these wholesalers focus on selling electronics. And there is where the connection lies.

The "vibe" at CES is that things are getting better, and thus companies are investing more to show their wares. Hopefully, this will ultimately translate to sales and revenues.

As I have said in prior posts, we are now starting to see glimmers of good news. Hopefully this momentum will eventually translate into a growing economy and more importantly - jobs.

In the mean time, like most purchase order funding companies, we are still going to focus on government suppliers.

Need a reminder of how purchase order financing works? Check out these purchase order financing resources.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Jack of all trades "Government Suppliers".

2010-01-06T08:55:00.000-08:00

Lately, I have seen an increase in government suppliers that are looking for purchase order financing. It's no secret that factoring companies like working with government suppliers because the US government is a great payer.

One thing that I have noticed is that the number of "jack of all trades" suppliers is increasing - dramatically. These are suppliers that claim they will sell anything and everything to the government. Form IT Equipment, to radios, to cleaning supplies to food. All by themselves. More often than not, the "jack of all trades" supplier is a single owner (or husband and wife team) entrepreneur who started their company intending to be a government supplier.

In my experience - most of these fail. Period. That is not to say that some will succeed and do nicely. Sure. But those are few and far between.

There are probably many reasons for this but I'll hazard a guess. Most government purchases are highly specific, which requires specialization. The government even has specifications for buying simple things like mops. Imagine their specifications when buying complex things like IT equipment, or radio equipment , or electronics. Few business owners could develop the expertise and the supplier relationships to be able to service all types of contracts. What a juggling act! How can they develop meaningful supplier relationships if they go fishing for a different supplier for every order? Also, how can they can develop sufficient volume with any supplier to get favorable terms?

There is another catch. Profit margins in government sales are low because of competition. The only way these supplies can make a living is by getting their product at rock bottom price and by fulfilling large orders. Again, the focus seems to be volume and specialization.

But this makes sense. How many successful companies started and became successful by doing disparate things. That's also why the only business financing we offer is factoring and purchase order financing only :-).

---
Looking for information on purchase order financing? Read the purchase order finance blog

General Business Financing Resources

2010-01-05T08:13:00.000-08:00

I plan to put some posts out that contain useful links to business financing resources. These are just some articles that were written a few years ago. Some of these are even more relevant today, since the economy is not doing well:

1. How to get paid by clients on time
2. What is trade credit? How to offer payment terms
3. Understanding invoice factoring - a business case

We have a number of resources in the articles section of the site and cover a whole number of subjects from factoring to purchase order financing.

Additionally, more information on factoring and purchase order financing can be found here. You can also find more information here and here.

---
Looking for information on purchase order financing? Read the purchase order finance blog

I need funding.... Fast!

2009-12-03T11:23:00.000-08:00

We pride ourselves of being able to move fast. As you can imagine though, speed is in the eye of the beholder. One thing that we find concerning is when we get a call from a client that needs funding in a week or two because they committed to an order that they can't deliver without funding.

Here is the typical scenario we see often. We get a call from a prospect saying they have a great opportunity. During the conversation, it becomes clear they have already made the sale and committed themselves to making a delivery. However - they can only perform if they get purchase order financing. And they need it fast! Within a week or two, because the clock is ticking..... Otherwise, they order falls through.

I consider this scenario very very risky. They have committed themselves without the certainty that they can perform. Many times, the end customer is not aware of this either. I suspect that many underwriters grit their teeth when they see this scenario and also wonder what other risks this company is taking......

A safer strategy is to try and get purchase order financing (or your other type of business financing) before you win the transaction. That puts you in a much better position to deal with any unexpected problems, such as delays.

---
Looking for information on purchase order financing? Read the purchase order financing section of factoring articles, or the purchase order finance blog

Purchase Order Funding - Information

2009-12-02T06:34:00.000-08:00

Are you researching purchase order funding? I have found that many readers come to this blog to research purchase order funding. Since we have a number of resources available on the subject, I wanted to make your life easier and share a few articles with you:

1. What is purchase order financing?
2. Purchase order financing for distributors and wholesalers
3. Importing goods from China? Consider purchase order financing
4. Growing your import business with purchase order financing

This is just a small sampling of articles from the po funding resource area, there are certainly more articles at the location.

Of course, you can also learn a lot just by reading this blog!
---
Looking for information on purchase order financing? Read the purchase order finance blog

PO Financing vs. Production Finance

2009-11-21T07:50:00.000-08:00

One common mistake that prospects make is to confuse purchase order financing with other forms of financing, such as production finance. The confusion is understandable, the name "purchase order financing" sounds intuitive and many people assume that it means that any order can be financed. Unfortunately, that is not correct.

Purchase order financing companies will only finance certain types of purchase orders. Specifically, for an order to qualify:

The client must be a re-seller and not a direct manufacturer. Using a 3rd party manufacturer is ok though
The client must buy all the goods from the order from a single source. Said differently, each order must have a single supplier.
The profit margins must be at least 15%

Here is what purchase order CANNOT do:

Help finance the machinery to deliver on a purchase order
Cover employee expenses or rent

These last two points fall under the real of production financing (or perhaps a business loan or line of credit)

Be sure to read our new information section on po financing at factoring articles.

Why do Purchase Order Financing Applications require Personal Information?

2009-11-20T14:50:00.000-08:00

Many clients are usually perplexed when they find out that many purchase order financing companies require that they submit personal information about the owners as part of the application. "Why?", they ask. "I am not asking for financing for me, but rather for my company".

Let me give you a purely hypothetical example to show things from a different perspective. Obviously, as examples go, this one is a little extreme. This is done to emphasize the point:

Case 1 - Jill. She has a criminal background that includes felonies. Furthermore, she has a record of passing bad checks, not paying taxes and is currently being sued by credit card lenders and collection agencies. Jill decides to start a business, and the company is able to generate some sales. As a matter of fact, the company grows because Jill is such as persuasive salesperson (and owner). Jill decides that purchase order financing can help her.

Case 2 - Jana. Jana has no criminal background and pays her taxes on time. She has no open or pending lawsuits. Jana decides to start a business, and the company is able to generate some sales. As a matter of fact, the company grows because Jana is such as persuasive salesperson (and owner). Jana decides that purchase order financing can help her.

Both cases describe the same business. The only difference between these two cases is the owner background.

Would you feel comfortable funding Jill's business? Perhaps some business financing companies would - but most would not. Why? Well, for starters she is not paying taxes. That's never a good indicator and does not bode well for anyone. She is also being sued and has a criminal background. Some time ago I wrote about the 5's of business financing. One of the "c's" was Character. Specifically, the character of the business owner.

Unless your purchase order financing company knows you personally, the only way they can determine whether the business owner that they are dealing with is good to work with is by asking for a lot of personal information and doing due diligence. And remember, although your finance company may be providing the funds to your business, they depend on the business owners to carry out the plans and manage things diligently and honestly.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Why PO Financing Does Not Mix with Bank Financing?

2009-11-19T15:04:00.000-08:00

Lately, I have been getting calls from prospects that have a line of credit or business loan and want to add PO financing to their business financing mix. It seldom works.

The reason is simple. A purchase order financing company usually secures their position by filing a lien against the receivables (invoices) generated from the orders it finances. However, most financial institutions will also file a lien that encumbers the company's invoices when the company gets the small business loan.

Note that institutions do this for most business loans - even those that are used to buy an asset such as real estate. Perhaps, more surprising is that business owners find out about this when they talk to me and we do a record search. 9 out of 10 times they didn't even know that they institution was doing this. By the way - institutions seldom this behind their backs. It's all very clearly spelled out in their loan documents. (The lesson: always read and understand legal documents before you sign them)

Why does this eliminate the possibility of getting purchase order financing? For the simple reason that the purchase order financing company wants to have a first position security interest in the invoices that are generated by the orders they fund. Otherwise, if a client defaults the business loan, the institution could claim the proceeds from the invoices as collateral.

Some banks may be willing to subordinate their position and allow you to work with a po financing company, but this seldom happens, especially in these recessionary times.

Disclaimer: This article does not offer legal or financial advice. If you need it, get an adviser.

I also wrote about this subject as it relates to factoring.

---
Looking for information on purchase order financing? Read the purchase order finance blog

One Bright Spot in Employment

2009-11-09T13:51:00.000-08:00

One of the leading economic indicators, in my option, is the level of employment in the temporary staffing industry. It's a "leading" indicator because it goes up (or leads) ahead of conventional employment. The reason is simple - employers prefer to hire temps before hiring permanent staff. The WSJ recently posted an article that said just that - temporary employment is on the rise. Some of the rise is seasonal, due to the holidays.

Regardless, this is good news. It will prove good for factoring companies that offer factoring for temporary staffing agencies. In my small world - this is good news.

---
Looking for information on purchase order financing? Read the purchase order finance blog

CIT is bankrupt. Now what?

2009-11-04T11:55:00.000-08:00

As I have mentioned in some posts (in my other blog) I have been following the fate of CIT
with particular interest. You can find a post here and here. CIT is the USA biggest factoring company - with 8B in factored receivables. One concern I have always had is - what will happen to their clients - and - what will the impact on the economy be? Her is an article on the WSJ that talks about the concerns of CIT's bankruptcy.

I suspect - this will be a double edged sword. Initially, it could be a boom for the factoring and purchase order financing industry as they pick up some clients form CIT. The effects on the economy could be very negative. One important aspect of this bankruptcy - clients could see their lines of financing modified or eliminated, which would affect their ability to meet current expenses and possibly lead to layoffs and business closures. Not a good scenario - and I hope it does not happen.

The same goes for companies that were hoping to get other types of business financing form them - such as a business loan.

Hopefully the bankruptcy will work out for everyone - otherwise we stand to lose quite a bit.

---
Looking for information on purchase order financing? Read the purchase order finance blog

The Recession May Be Over - But Signals are Mixed

2009-10-29T08:07:00.000-07:00

We are going through a period of mixed signals - common when recessions start turning into growth. For example, this article talks about the GDP growth. Another article talks about a slight increase in durable goods orders. But they both also contain negative data about unemployment and the housing market.

All in all, this is a mixed bag.

Although the reductions in bank financing have been a boom for companies in invoice factoring and purchase order financing, the industry as a whole had a bit of a lousy year. Sure some companies did great. But many others left the industry because of bad deals or due to lack of financing. Yeah, some purchase order financing companies are financed by banks or hedge funds and had their lines cut off (learn more about how po financing companies are funded).

Personally, I have seen overall improvements and think things may get better. But I also know how fragile this recovery is, thanks to the housing mess and high unemployment. I, for one, will keep my fingers crossed.

(p.s. Check out the purchase order financing resources to learn more about po financing)

---
Looking for information on purchase order financing? Read the purchase order finance blog

Presenting yourself and your business

2009-10-13T07:19:00.000-07:00

Several months ago I had a call from a prospect that wanted purchase order financing. During the first 5 minutes of conversation, it became clear that the prospect was not up to speed on their own business. Their introduction went reasonably well until I started asking questions. Even the most basic question required that they stop and think for a while, only to produce an unacceptable answer.

Basically:

1. They could not tell me their line of business with any clarity. They could also not articulate how they got started in their business or what their level of experience was

2. They were not able to tell me if they had won the orders that needed financing, or if they were only bidding

3. Although they needed financing for two simple orders, it took him two minutes to ruffle through the orders to tell me what they were for. (By the way, they were simple, as in, the client wanted 100 widgets)

4. He had no idea of the size or expected gross margins on the orders

Although we spoke for 20 minutes, the prospect was not able to give me a single piece of actionable information. Ultimately I excused myself because I had a meeting to attend to and ended the call.

It was clear to me that the prospect had not prepared themselves, even in the slightest most basic way, to present their business for financing. How can they expect to land business financing if they can't answer the most simple questions about their company? Factoring and purchase order financing can be easier to obtain than a conventional business loan - but they still require that you prepare yourself to answer questions about your business.

By the way, the world of business financing is not different from other types of venues where first impressions can be last impressions.

Note: this post does not depict a real call or real prospect - but rather a collage made from several experiences.
---
Looking for information on purchase order financing? Read the purchase order finance blog

Four Reasons Small Companies Fail

2009-09-22T14:25:00.000-07:00

Depending on whose statistics you believe - the odds are stacked against entrepreneurs. Folk wisdom says that only 1 in 10 business survive the first year. And of those, only 1 in 10 make it to the 5th year. I doubt these statistics are accurate but I know for a fact that most start up companies won't make it past their first year.

Why do these businesses fail? Many books have been written about this subject. However, I'd like to pitch in my 2 cents.

Being in the front lines of the purchase order finance industry gives me a front row seat into this phenomenon. I speak to entrepreneurs every day of the week. Many of these fail to realize their dreams. Now, I can usually tell whether the start ups will take off or not by asking four questions. I believe these questions also provide an answer as to why many start ups fail.

1. What led you to start this company?

This question always gets interesting responses. Answers range from "I want to get rich",to "I saw an opportunity" to "I want to be free". The latter one is good for laughs since most entrepreneurs work harder than most folks.

I ask this question because it gives me a good glimpse about the person running the company.

2. Where did you learn the industry?

Many people learned their industry from their current jobs and are branching out on their own. Other learned a brand new industry by speaking to experts. Some, even learned it by reading a book - or many books. Regardless, I always prod them by asking technical questions about their business. How they answer those are a very good predictor of their knowledge and critical to their initial success.

I ask this question because it gives me a good idea of the depth of their experience.

3. How long have you been at it and have you made your first sale?

This one is obvious, companies without sales don't last. But there is a hidden undertone here, I know of successful company that went on for 9 months before closing their first client. I this this shows stamina and determination. Starting a business is a marathon and requires a certain single mindedness. By the way, that company owner that took 9 months to close their first client was none other than me!

I ask this because it gives me a good idea of their current level of sales and their stamina.

4. How much money did you put into the business?

Business books are full of stories of millionaires and billionaires that started their company with $100 or $1000 dollars..... These are the exception and not the rule. Most businesses, even single person companies, require a substantial investment. A few thousand dollars minimum. Many times, tens of thousands of dollars. Sometimes even hundreds of thousands. The easiest way to get your company disqualified is to tell a prospective business financing company that you only put $1,000 into your business. If you are not committed, why should they? I also wrote about this on this post.

I ask this because I want to know if they (figuratively) put their money where their mouth is!

Although my method is not very scientific it works very well, at least for me. It's a good predictor of who to focus on. I suspect that on some level, many business finance professionals use these or similar questions themselves.

In summary, small business owners fail when they have:

1. Unrealistic expectations
2. Little experience
3. Little or no income
4. No/Minimal investment

Sounds obvious, doesn't it? That's because it is.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Is the Recession Over?

2009-09-22T09:56:00.000-07:00

There has been a lot of buzz that finally the recession is over and a recovery may be on its way. I even commented about it on the invoice factoring blog. Overall, we are also noticing a recovery in our clients.

Many purchase order financing clients are suppliers to the retail industry. I believe that if you could look at the book of business of your average purchase order finance company, you'd get a leading indicator of how the retail sector will perform these holidays. Don't look at me for answers though, I can't tell :-)

On a related note, I also think that factoring activity can be a leading indicator to both the recovery and future retail activity. Personally, I tend to look at both invoice factoring and purchase order financing as possible indicators of things to come.

Either way, the news on the retail front lately has been mildly positive and showing improvement. What do you think will happen this holiday season?

p.s. don't let the image I chose fool you into thinking it's a hidden clue. It's not. I just like the image.

---
Looking for information on purchase order financing? Read the purchase order finance blog

A Tool for Small Businesses

2009-09-18T09:37:00.000-07:00

In previous posts, both in this blog and in my other blog (invoice factoring blog) I've talked about the mistakes that small business owners make when they are looking for business financing - specifically factoring and purchase order financing. Today I am going to talk about PO financing true potential.

Most businesses -at least the successful ones - are limited by the capital or funding they have. Those that have it grow. Those that don't, stagnate or perish. Purchase order funding provides you a way out of that problem, provided your business meets certain criteria:

It must resell products (i.e. be a dealer)
It's must buy products for re-sale from another business or alternatively, have a 3rd party facility provide all manufacturing services.
It must have high profit margins (say > 20%)
Lastly, it must have credit worthy clients

The last point is crucial. If you are selling goods to creditworthy clients, such as large companies, po financing may be able to provide the funding you need. Basically, po financing covers the costs of paying your suppliers and enables you to handle large purchase orders.

Purchase order financing is also very different from conventional products such as business loans. For starters:

It's less cumbersome to obtain than a conventional business loan
There are no month-long-waits. Most approvals/denials are done quickly
The line limit is based on the size of the po, the credit quality of your clients and the quality of your suppliers

Although not a panacea, purchase order financing can provide the needed financing for many small companies.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Odd Trend in Government Contractors

2009-09-17T11:40:00.000-07:00

Lately, we have been getting a lot of calls from prospects that are looking to finance their government contracts using purchase order financing. Many of these are start ups. As I have said before, a big chunk of our business involves financing start ups. So far so good.

What is odd is that many of these company owners seem to have unrealistic funding expectations. For example, many of these owners:

1. Can't put any money into the business (above say, $500)

2. Have never sold anything to the government before

3. Don't have much business experience

I am all for entrepreneurship and like to think that we are a good business financing source for young companies. At the same time, most funding companies like to work with business owners that have realistic expectations.

Let me ask a reader question - would you be willing to fund a company that has no experience and no capital? Would you?

So - what can a very small business owner who is low in cash but wants to work in this field do? Well, if you'd like to increase your chances of getting funding, consider the following:

1. Learn how to sell to the government. Read read and read some more!

2. Get a couple of successful transactions under your belt - even if they are small. This is critical.

3. Save some money and invest it in your business. Show the funding company that you believe in your own business by putting your own money. Have no money to invest? Well, start cutting some of your discretionary expenses and start saving. No one said business ownership was easy :-)

4. Be realistic. If you have done two $5000 transactions with your new business, don't call your funding company and tell them you will be doing $1000,000 in 6 months. Sorry, it's not believable.

And remember,plan, plan and plan some more. Weather you are looking for po funding or a business loan (or something in between), funding companies prefer to work with business owners that plan ahead.

One last thing - don't get discouraged if you can't get po funding the first time. It can happen. You may also want to consider getting factoring as a stop gap. Qualifying for factoring is usually easier than qualifying for po funding.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Slow Pays Are Here

2009-08-31T08:16:00.000-07:00

I recently wrote an article about how bigger companies were collecting quickly but paying invoices slowly. You can read the post here. The article came from the Wall Street Journal and basically details how bigger companies are improving their cash position by using this technique.

The fact that many companies are paying at a snail's pace has both increased the demand for invoice factoring and purchase order financing services. However, there is a catch. Many companies that are paying slowly have also inadvertently affected their business credit (if they now pay beyond terms).

---
Looking for information on purchase order financing? Read the purchase order finance blog

How Are Purchase Order Financing Companies Funded?

2009-08-26T12:58:00.000-07:00

Most purchase order financing companies are funded by one, some or all of the following:

1. Bank line of credit
2. Hedge funds
3. Owners own capital
4. Investors
5. Larger factoring companies (who invest in a smaller factoring company)

So, like most financial businesses, they reinvest these funds in financing transactions and then make the difference between what they charge and the cost of funds (less expenses, write-offs etc).

---
Looking for information on purchase order financing? Read the purchase order finance blog

One Supplier vs. Many?

2009-08-17T07:49:00.000-07:00

Most purchase order financing providers usually finance orders where only one supplier will be needed to fulfill it. And they specifically try to avoid financing orders where there are:

1. Multiple suppliers -or worse -
2. Multiple suppliers that depend on each other (e.g. one produces product, another one the bottles for it and a third one the labels for the bottles)

Why do we avoid these transactions? Well, because of the risk. Specifically, the risk that one of the multiple suppliers will fail, preventing the complete order from being delivered and paid for.

Here is an example, let's say that you produce beverages and have an order for $100,000. You have the following suppliers that need to be paid:

1. Bottle company
2. Label supplier
3. Beverage producer and bottler

What happens if the bottle company delivers bad bottles? or if the label company does a shoddy job? We are still stuck paying the other suppliers but the order will likely fail. The customer won't take delivery and they won't pay. This is a risk we aim to avoid.

If you have multiple suppliers (for a single order) you way need to consider other business financing options, such as a business loan or invoice factoring.

---
Looking for information on purchase order financing? Read the factoring articles or the purchase order finance blog

PO Funding and the Holiday Season

2009-08-17T07:24:00.000-07:00

There are areas of the purchase order finance industry that are related to the retail industry - and thus the holiday season. If you do the math, most retailers will start placing their holiday orders in the summer (or late summer) so that their shelves have goods available for the Xmas holiday.

Of course, few invoice factoring and purchase order financing companies will share this information - but I'd be great if we could pool our data into a common index that showed economic health.

---
Looking for information on purchase order financing? Read the purchase order finance blog

Turnaround Situations

2009-07-20T10:53:00.000-07:00

Given the current state of the economy (although it's improving!), I get many calls from businesses that need purchase order financing to fund their turnaround. Is po financing the right solution for a turnaround? It can be, but you should know that it will not be as flexible as factoring. Two things to bear in mind:

1. Most po funders can work with companies that are showing losses, if those losses are tenporary and if there is a solid plan in place to turn around the company.

2. Most po funders cannot work with companies that have negative equity. Basically, when liabilities are greater than assets.

This can sometimes be a bitter pill to swallow for business owners, especially in these hard times. But unfortunately, the risks associated with negative equity are too great. Also, many financing companies (who themselves get financing elsewhere) may have restrictive covenants that prevent them from funding companies with negative equity. So remember that their hands may be tied as well.

So, po financing can be useful in turnaround scenarios, but not but it's not the right business financing solution for all cases.

---
Looking for information on purchase order financing? Read the purchase order finance blog

CIT Group news

2009-07-11T13:12:00.000-07:00

Here is an article on the journal about CIT group. This is actually a concern for the industry as CIT is a major player in trade financing - and a major provider of factoring and invoice factoring. Although I suspect that CIT is not "too big to fail", it's failure could have strong repercussions in the small business community in the USA. I know that they finance a number of franchises and small businesses.

This one should be on everyone's radar. I certainly wish them luck.

---
Looking for information on purchase order financing? Read factoring articles or the purchase order finance blog

Purchase Order Financing and Business Loans

2009-07-10T08:26:00.000-07:00

As I mentioned in a recent post we have been getting a lot of clients that used to have (or currently have) a business financing package from their bank. Most companies that get a business loan, also get a lien encumbering all assets.

It will be close to impossible for you to get any other type of financing (whether it's factoring or purchase order funding) unless one of two things happen:

1. You pay off the loan and the bank releases the lien. Sometimes this payoff can come from your new facility.

2. The bank agrees to subordinate their position

Option #2 basically means that the bank gives first priority on certain (or all) assets to the new financing company. Businesses that have existing bank financing and want to start using purchase order funding to grow their operations will, more often than not, need to address this.

Few people know about this, but it derails many opportunities that come through my desk. If you have existing financing and you are looking for a new company, you should review your current loan/financing documents and make sure you understand them. And, as with all legal matters, you should consult an attorney or a financial professional since the writer of this blog (that's me!) disclaims all liability and does not offer financial advice :-)

---
Looking for information on purchase order financing? Read factoring financing articles or the purchase order finance blog

Financing Startups? Yes - But Be Sensible!

2009-06-24T07:21:00.000-07:00

We are quite happy to offer purchase order financing to startups. Because of that, we get many calls from budding entrepreneurs looking for business financing. Many are disappointed when we decline the opportunity to participate in the business. In part, we decline many of them because they have unrealistic expectations. Here are some examples of things we see that will garner a DECLINE:

1. Entrepreneurs that don't put any money themselves

This one is a classic. We get a balance sheet that shows that the owner put $1,000 in their business with NO other assets or sales and expect us to fund the rest. I think there is a myth, in part propagated by some famous entrepreneurs that did start with $1000, that this is enough. Let me ask, why would *WE* risk capital if the owner is only risking $1,000? The short answer is we wouldn't - and don't.

2. No Experience

It is common for people to try and start a business for which they have no experience. As a matter of fact - I did so myself. But it is unrealistic to ask others to finance your startup until you have had some successful transactions under your belt. You should expect to self-finance your business until you learn the ropes, just like I did :-)

3. Unrealistic Goals

"Marco, this is a new concept and we'll be a $12,000,000 by the end of the year. We just need the Money. And, oh by the way, I only put $1000 in the business (read #1)." Sorry, the odds are that you wont be a going concern by the end of the year. Well thought out sales forecasts are a must. And also - tone down sales expectations - otherwise you could set your self up for failure if you don't meet them. Remember that running a startup is challenging.

4. Thinking their business has no risk (riiiight!)

This is a classic. I get a call from a startup entrepreneur who tells me their transaction has no risk. As a rule of thumb, I always turn these down. No exceptions. Even if everything else appears well thought out. All transactions have risk. Period. Otherwise, there would be an opportunity for Arbitrage. And if an entrepreneur cannot see that -then we consider them dangerous. Investors consider one of the few risk free assets to be US Government securities (e.g. TBILLS).

So weather you are looking for a business loan, factoring or any type of funding, keep these points in mind.

---
Looking for information on purchase order financing? Read the purchase order finance blog or look for business loan financing in wisconsin.

The 5 C's of Lending

2009-06-11T06:46:00.000-07:00

Although this blog is not about lending, let me borrow a page from their playbook. Lenders always talk about the 5 C's of lending. They are:

Capacity

Credit

Collateral

Conditions

Character

Today we will talk about Character. Now that the economy has been in shambles for a while, many companies are starting to become desperate for any kind of business financing. It's a survival thing, and it's understandable. But credit crisis or not - the 5 C's still rule. Now, more than ever. Character - and this refers to the owners and managers - is critical. What is character?

Well, it varies by firm. In my little world of purchase order financing, for us, Character involves having prospects that either:

1. Have a complete clean slate. That is, they have good/reasonable credit and not blemishes such as bankruptcies/etc.

-or-

2. Have a blemished slate - that is explainable and reasonable. And also - be upfront about it. Don't wait for our underwriting team to find it.

You read #2 right. Don't hide it. Rather bring it upfront early and have sensible explanations for what happened. Even if you made a "dumb mistake", be upfront. That may not guarantee approval, but will almost certainly trigger respect. And respect helps you get approved.

Let me tell you a story about a prospect that I had years ago. They ran a successful start up that sold products to the government. They had not been able to get a business loan so they approached us for some financing. In their application they marked that none of the owners had ever been involved in a bankruptcy.

Our search indicated that they had a prior Chapter 7. When confronted, the owner explained that there had been a medical problem - coupled with a nasty divorce - that led to the bankruptcy. If they had explained this situation upfront they would have been approved. But they hid it and lied on their application. Unfortunately, we declined them.

This may sound harsh. But think about it this way. Problems will happen during a financing relationship. It's just how it is. We understand it. But we also only want to work with people that will own up to them and face them, not with people that will hide them until the problems blow up.

---
Looking for information on purchase order financing? Read the purchase order finance blog to learn about business loan financing in wyoming

Credit Enhancements as a Substitute for Purchase Order Financing

2009-05-20T08:31:00.000-07:00

Recently I have been getting a number of call from companies that are looking for purchase order financing. After a short conversation, we invariably find that we can usually help this client by combining conventional invoice factoring with a credit enhancement.

Lets first look at the problem they are trying to solve. Most of this prospects have suppliers that are unwilling to extend them additional trade credit. If their suppliers were willing to extend their already existing credit they would be fine.

Well, this can be done using factoring and including an agreement where the factoring company direct advances to the supplier (to satisfy moneys owed) first, and then send the reminder to the client. Usually, this does the trick.

The advantages:

1. It helps you build your commercial credit
2. It's usually cheaper than purchase order funding
3. It's less complicated than po funding

Now, not every factoring company offers this. Also, I have over simplified a few points for brevity. But if you are looking for purchase order financing, you'd be wise to compare it against conventional credit enhancements.

---
Looking for information on purchase order financing? Read the purchase order finance blog