How to finance large orders quickly when the bank won’t lend

The logistics of financing large business orders can give business owners a financial headache. Large orders often demand an upfront drain on resources. And if a customer stretches payment terms, financial difficulties can follow.

This is the story of a Midlands based company that used PURCHASE ORDER FINANCE, after it was put under strain following a large order from an existing client who then asked that its payment terms be extended from its standard 30 days to 60 days.

Having won the new order, the company’s customer demanded that its payment terms be extended from its standard 30 days to 60 days.

Despite the company’s existing client base remaining on 30-day payment terms, the company soon moved from being cash positive to cash negative.

The company’s first step was to contact its bank. Unfortunately, the bank declined to provide an overdraft. Instead, it introduced the company to its invoice finance division.

In fact, in the search for a solution to its cash flow problems, the company contacted several invoice finance companies.

However, it found that full-service invoice finance facilities were not flexible enough to meet its needs. The company only needed to borrow money to buy stock to supply their new customer because their customer wanted longer to pay.

Furthermore, it didn’t want to change the nature of its relationships with its other customers, which would happen if the company factored its invoices.

Finally, the company engaged the services of the Business Bureau who were able to find a solution that worked.

Purchase Order finance meant that our client’s supplier was paid immediately by the finance company and they obtained a better discount because of it.

Our client then has 120 days to repay these funds.

We were also able to put in place a Selective Invoice Finance facility so our customer could factor the invoices from a choice of their customers to enable them to repay the purchase order facility

The market research company accepted a single invoice facility that provided it with 80% prepayments against invoices.

Not only did this allow the company to finance invoices for a customer on an ad hoc basis, it also helped them to finance the large order without altering its relationship with the rest of its customer base.

Industry sector: Wholesale Bike Parts

Facility provided: Purchase Order Finance and Selective Invoice Finance

Total Facility: £400,000