Purchase Order Financing: An Effective AlternativeBy RMP Trade Credit
Purchase order financing provides an invaluable resource to manufacturers, distributors, and wholesalers needing funding to produce and distribute goods to their customers. Purchase order trade finance companies offer a product to fund the production of goods to customers throughout the world. Companies who use purchase order financing find it to be a cost-effective alternative to maintaining inventory and the value-added services which purchase order finance provides prove to be a great asset in navigating the supply chain process from pre-production to delivery.
In one scenario, a supplier, vendor, importer/exporter, distributor, or reseller has received a large unexpected order from their customer. To be sure, this is often a very exciting and gratifying experience for any company. Now the company must plan the production of goods to be able to deliver, as promised, to its customer. The purchase order finance company is usually contacted just before or just after the closing of a big deal like the one mentioned above. Company management works with clients to ensure that the process runs smoothly, that the factory will meet its deadlines, and that the goods will arrive in good and working condition to the customer.
The process itself is simple:
- The customer submits a purchase order to our client
- The client then submits the purchase order to the purchase order finance company for review and approval
- The purchase order finance company issues either a Letter of Credit or, if a deposit is made by the client, Payment Against Documents
- The manufacturer completes the order and the goods are inspected to ensure that they meet the standards of the customer’s request
- The goods are then shipped through a trusted freight carrier to the customer, after which an invoice is generated
- At this point the bank, factoring company, lender, or other source of funds pays the purchase order finance company for the money advanced and they follow the invoice to collection.
With the increased shift to Just-In-Time inventory systems, purchase order financing can play an important role in fulfilling orders quickly and cost effectively. The confidence in having a trusted financial partner on call to fulfill orders allows companies to use their valuable cash resources elsewhere in the business, rather than using those cash resources to stock, maintain and track inventory until it sells. Inventory can drain cash from a company and, if that inventory does not turn efficiently, the company may be forced to sell the inventory at liquidation – thereby reducing margins substantially, if not outright trading money given the costs of production, maintenance, and the liquidation itself. The space previously used for the warehousing of goods can be repurposed into office or retail space or the company can move into a more scalable facility which reduces overhead costs and instead of employing resources to maintain the inventory, a company can focus its efforts on boosting sales and maintaining customer relationships. Purchase order financing can alleviate these issues for a fraction of the cost of maintaining inventory, allowing a company to run a leaner, nimble organization focused on its customer.
RMP Trade Credit employs professionals with over 60-years’ experience in manufacturing and distribution, both internationally and domestically. In each transaction and client relationship, a dedicated account cxecutive is active from the initial stages through the delivery. This brings valuable expertise to the process and gives the client assurance that the process moves along without issue. Additionally, RMP Trade Credit uses a worldwide network of goods inspectors, freight forwarders, and customs brokers which ensure that no unexpected problems occur and that the customer will receive their goods in working condition, on time. For many companies, this relieves a large burden from the process and allows them to work on the next sale, rather than worrying about the supply chain process. By doing this, RMP Trade Credit creates a win for all parties involved. The customer receives the goods as promised, the client is able to deliver on their promises, and RMP Trade Credit ensures that it is repaid for money advanced for the production of goods. Through this global teamwork driven approach, clients have discovered how RMP Trade Credit’s Purchase Order Financing product can become their trusted partner in the supply chain process.
RMP Trade Credit handles transactions from $50,000 to $5,000,000 and for periods of 30 to 120 days. The process to set up a transaction is a quick process:
- The client submits an application with additional required information
- Documents are issued to the client
- Purchase Orders are submitted
- The purchase order finance company works with all parties involved to setup the transaction and advance the funds needed for production
Often, this process can be completed in 2-3 days or less. In this way, RMP Trade Credit provides a reliable resource which can respond quickly to its Client’s needs. It’s this dedication and commitment to delivery which sets RMP Trade Credit apart. We are a part of the Commercial Finance Association and International Factoring Association, which provides a level of confidence in RMP Trade Credit’s business ethics and standards.
To learn more about this process, please reach out to us and complete a no-fee application. Our dedicated professionals can walk you through the process, the timing, and the costs of funds. Hopefully after your discussion, you will see that purchase order trade finance can be a valuable ad hoc financing source or a source of funds which you employ on a regular basis to fulfill purchase orders quickly and to reduce the costs of maintaining inventory.