Purchase Order Financing- a Bridge

| Posted: 14-06-2007 | Comments: 0 | Views: 11 | Rating: (50)

(?)

America is a land of opportunity. According to the United States Census Bureau, recent data indicates over six million new businesses were created in 2003, the latest year for which data is available. It appears that for every business that was created another business met its demise. Does this mean these business enterprises failed?

Not necessarily. The United States Census Bureau records closures of companies with employees, but they do not look further into the specific circumstances for the closure. When a business closes its doors, there can be many reasons for what's statistically a "failure," including a sale or merger, which may actually be a sign of robust financial health or good prospects. When a business closes, it may be because the investors have lost their investments or because they have sold out profitably.

Selling out profitably is known as an exit strategy; it is also known as “cashing out”. If you have a business that manufactures or distributes a product that suddenly becomes very popular, you may be presented with a once in a lifetime opportunity. Here are two examples.

An inventor of a device that permits parents to regulate the time that their children can watch television wins best of show in a commercial competition for innovative products. Commercial interest in purchasing the product is intense, but funds to manufacture are insufficient. Another company manufactures a device that is related to pets. For twenty years they struggle. They pitch it to a “Big Box” store and sign a proposal to test market it in fifty stores; if successful, it will be rolled out to 200 to 300 stores with wholesale purchase orders for $1000 per week per store. If the product sales meet expectations, how will the manufacturer afford to pay to produce the immense quantity of product required?

Both of these situations are in need of a bridge over troubled water called purchase order financing. Purchase order financing can be complicated and complex in details, but the concept is simple.

When a manufacturer or distributor has a large purchase order from a creditworthy customer, a commercial finance company will issue a Letter of Credit to guarantee that a factory producing the product will be paid. When the goods are shipped and delivered to the customer (i.e. the big box store) the commercial finance company pays the factory. The customer is invoiced for the product. An account receivable is created, which will be paid to the commercial financing company that provided the letter of credit. Purchase order financing is the bridge that makes the deal possible. Accounts receivable financing, or factoring, is the back end financing that guarantees payment to all concerned. This may involve one company on both sides of the transaction, or two companies- a purchase order financing company and an accounts receivable financing company with an intercreditor agreement to contractually obligate all parties to be repaid.

The Free Dictionary defines bridge as a verb, - .to make a bridge across; "bridge a river"
To bring together, join- cause to become joined or linked; "join these two parts so that they fit together".
Simon and Garfunkel were an extremely popular band staring Paul Simon and Art Garfunkel. They became famous in 1965 with their hit single "The Sound of Silence”. Their music was featured on the academy award winning film, The Graduate. They were well known for their close harmonies and sometimes unstable relationship. Their last album was called “Bridge Over Troubled Water” which featured a single with the same title. They broke up in 1970. In 1981 they reunited for one more concert called: “The Concert in Central Park” which attracted 500,000 people.

The lyrics to “Bridge Over Troubled Water” are:
When youre weary, feeling small,
When tears are in your eyes, I will dry them all;
I’m on your side. when times get rough
And friends just can’t be found,
Like a bridge over troubled water
I will lay me down.
Like a bridge over troubled water
I will lay me down.

When you’re down and out,
When you’re on the street,
When evening falls so hard
I will comfort you.
I’ll take your part.
When darkness comes
And pains is all around,
Like a bridge over troubled water
I will lay me down.
Like a bridge over troubled water
I will lay me down.

Sail on silvergirl,
Sail on by.
Your time has come to shine.
All your dreams are on their way.
See how they shine.
If you need a friend
I’m sailing right behind.
Like a bridge over troubled water
I will ease your mind.
Like a bridge over troubled water
I will ease your mind.”

The bottom line: Simon and Garfunkel were right. Like a bridge over troubled water, purchase order financing combined with accounts receivable financing will “ease your mind” and help you overcome “troubled waters” when a huge sales opportunities are on the table and exponential growth and financing are necessary to your success.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Commercial Finance, Accounts Receivable Financing, Working Capital, Cash Flow, Purchase Order Financing, Letter Of Credit, International Trade Finance, Cash Flow Factoring

Article Source: http://www.articlesbase.com/finance-articles/purchase-order-financing-a-bridge-165127.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:

Mr. Elberg is a licensed attorney and licensed real estate broker. Gregg Financial Services is a full service brokerage for commercial finance companies and banks that fund B2B businesses. Mr. Elberg arranges funding from $25,000 to $50 million per month at competitive pricing. For more information about GFS, please visit our website:
www.greggfinancialservices.com

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

Accounts Receivable Financing- Hot
By: Gregg Elberg | 03/05/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Accounts Receivable Financing: Exporting Green Products
By: Gregg Elberg | 28/01/2007 | Ask an Expert

Financing Options for Import Companies
By: Gregg Elberg | 25/02/2007 | Small Business

B2b Business Opportunities
By: Gregg Elberg | 02/01/2007 | Credit

Accounts Receivable Financing: the Way to Increasing Profits
By: Gregg Elberg | 21/01/2007 | Business
Business Articles, learn about busines - An organization created with the objective of making a profit from the sale of goods or services.

Purchase Order & Letter of Credit Financing
By: Gregg Elberg | 29/01/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Advantages and Disadvantages of Factoring & Asset Based Lines of Credit
By: Gregg Elberg | 21/02/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Accounts Receivable Financing- the Weight
By: Gregg Elberg | 10/07/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Got a Question? Ask.

Ask the community a question about this article:

Frequently Asked Questions

Cash flow notes
By: michael | 16-07-2008
How do I find and cash flow notes?

What does negetive working capital implies?
By: Sivjis2000 | 06-04-2008
What does negetive working capital implies?

Purchase order financing in Sweden
By: sofia | 21-11-2007
I need information that shows that "purchase order financing" is uncommon in Sweden. In a couple of weeks I am suppose to work as a trainee in a company in Los Angeles. BUT the immigration-authorities wants information that shows p o financing is not that common in Sweden (which will describe why I need my trainee-place in USA). It could be a letter from somebody who knows something about this. It could also be written information on the web. Please!! Help me! Thanks in front! Sincerely, Sofia

Q&A Powered by:

Latest Finance Articles

Understanding Debt Consolidation Loans
By: Richard Greenwood | 07/10/2008
It can be all too easy to end up in debt and especially during the current times of financial uncertainty you may find yourself unable to make repayments. Consolidating your debt can make your debts easier to manage and lower your interest charges meaning you become debt free faster.

Credit Card Comparison
By: Richard Greenwood | 07/10/2008
Credit card offers are everywhere and all claim to out do each other. How do you cut through the marketing talk and understand the key features you need to compare to make an informed decision. Find out with this informative article on credit card comparison.

Shopping For Auto Insurance
By: Brenda Williams | 07/10/2008
When you get your license for the first time before you begin driving you need to get car insurance as it's mandatory to have car insurance while driving. Car insurance can be rather expensive, especially for new drivers which is why you'll need to ensure that you're getting the best...

Taking 100% Responsibility - the Prerequisite for Creating Money & Marriage Success
By: Leslie Cunningham | 07/10/2008
It's a simple concept, to refrain from blaming and complaining, and yet it's a challenge to change a habit, especially one that everyone else has. Like sticking to your diet, when everyone else around you is enjoying chocolate cake. Keep reading and you'll find out how this relates to your marriage and finances. Then I'll share some action steps to help you become 100% responsible for your life.

Retirement Income Investing and Your Portfolio
By: Steve Selengut | 07/10/2008
Brokerage firm monthly statements are designed to promote either fear or greed, depending on the current market environment. Nowhere on your statement can you find numbers that report your net investment, your total working capital, or your true asset allocation. Current and projected income numbers are given little attention

Buy to Let Investors Get a Boost
By: Parmdeep Vadesha | 06/10/2008
Buy to let UK investors are in a prime position to take advantage of a new government plan to spur property market activity. The scheme aims to permit property buyers to buy properties worth up to

How to Buy a Repossessed Property for Below Market Value
By: Parmdeep Vadesha | 06/10/2008
Buying a repossessed property is what matters for investors who are keen on reaping high profits. But even with the advantages it poses, there are certain aspects you need to be aware of before you start on the task of acquiring your next property cheaply.

Brits Should Ensure They Have the Cheapest Energy Supplier
By: Abbi Rouse | 06/10/2008
With energy prices escalating steadily, consumers could knock considerable amounts off their utility bills by switching from their areas default supplier.

More from Gregg Elberg

Commercial Finance- the Mortgage Meltdown
By: Gregg Elberg | 08/03/2008 | Finance
Commercial Finance- the Mortgage Meltdown explores the history of the mortgage meltdown of 2008, and the likely consequences to the public. The article looks back at the savings and loan crisis of the late 1980’s for comparisons. The effects on commercial finance, purchase order financing and accounts receivable financing are also discussed.

Purchase Order Financing- Easy Money
By: Gregg Elberg | 06/03/2008 | Finance
Purchase Order Financing-Easy Money explores the history of money, the conversion of gold to paper money and the similarities between the invention of bartering and purchase order financing.

The Gregg Diet- Eat a Lot
By: Gregg Elberg | 20/02/2008 | Self Improvement
The Gregg Diet- Eat a Lot is a follow up article to The Gregg Diet- It’s the Rub, an article written by this author about six months ago. The article re-examines the premise of this diet, the challenges of staying with it, and how mass quantities of the right foods can help you loose weight.

Accounts Receivable Financing- Bueno!
By: Gregg Elberg | 07/02/2008 | Finance
Accounts Receivable Financing- Bueno explores the international world of exporting to Mexico from the U.S. and importing to the U.S. from Mexico with the availability of commercial financing in the form accounts receivable financing.

Commercial Finance- Angel Money
By: Gregg Elberg | 25/01/2008 | Finance
Commercial Finance- Angel Money explores the world of angel investors. During these times of hard money what are the pros and cons of working with angel investors? Are they really venture capitalists with wings?

Commercial Finance- Hard Money
By: Gregg Elberg | 14/01/2008 | Loans
Commercial Finance- Hard Money explores the little known world of financing real estate and business accounts receivable with respect to situations that banks and other financial institutions typically avoid. The year 2008 will be known for difficult financial times for large institutions, businesses and individuals. Financing will be harder than ever to obtain.

Accounts Receivable Financing- Secrets
By: Gregg Elberg | 10/01/2008 | Credit
Accounts Receivable Financing-Secrets explores the little known world of factoring and purchase order financing. Many businesses and their bankers are unaware of the potential for exponential growth when these financing techniques are revealed to supply the missing capital needed for businesses that sell goods or services to other businesses.

Accounts Receivable Financing- the India Connection
By: Gregg Elberg | 05/11/2007 | Loans
Accounts Receivable Financing- The India Connection explores the vast growing marketplace in India and how you can benefit from this trend by importing goods or exporting goods to this ginormous economy with accounts receivable financing.

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (4.48, 16)

Purchase Order Financing- a Bridge

Article Comments

Related Articles

Got a Question? Ask.

Latest Finance Articles

More from Gregg Elberg

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter