First Financial Coach

Article by Stan Prokop

More and more clients ask how Purchase Order Financing in Canada works. In many cases a purchase order financing or inventory financing solution is the method by which there company can take itself to the next level of growth and profit. Historically firms with large inventory or purchase order financing requirements have found it difficult, if not impossible to access P.O. or inventory financing – that is slowly, and we repeat, slowly changing in Canada.One of the hidden benefits of this type of financing, which is more expensive than traditional financing, is the fact that it allows you to demonstrate to more traditional lenders, i.e. Canadian chartered banks and asset based lenders, that your firm can establish higher levels of sales with clients you might otherwise not be able to facilitate with your services and products.The main users or firms in need of purchase order and inventory financing are rational industry firms such as exporters, importers, firms in wholesale distribution, and of course manufacturing companies.The entire concept of purchase order financing is based on whats going to happen, not what has happened. The essence of the financing is the ability of your supplier to be paid by the inventory finance and purchase order finance firm in advance. That of course allows you to complete your transaction a d ship goods and services and bill and collect your receivables. The one key technical point of inventory and purchase order finance is the fact that the firms that finances these two items often has no interest in financing your receivables – they are in fact just specialized lenders that are experts in inventory and purchase orders and letters of credit. That raises a technical point you must understand, which is simply that the inventory and p.o. (Purchase order) finance firm expects to be paid when you generate an account receivable. Therefore it is critical that you either have a factoring facility in place, of that your bank line of credit allows you to facilitate the drawdown of that account receivable.When you utilize an inventory or purchase order financing firm in Canada it is now clear that you are relying on your finance partner’s credit to facilitate the purchase and payment of your inventory and products. While business financing has always been a challenge, it has become more pronounced in after the 2008-2009 global meltdowns in business financing. So while you can expect to pay higher rates for financing inventory and purchase orders the reality is that you can increase sales significantly as other traditional finance entities have backed away from this type of financing. The overall process for purchase order financing is fairly straight forward – based on our inventory and purchase order and contracts in hand you identify the supplier arrangements you need to make in order to facilitate products. Payment is made to your suppliers via cash or a letter of credit. If your gross margin is 30% and your purchase order is for 100,000.00 then naturally the purchase order or inventory finance firm usually is willing to advance 70k to your supplier as payment in full. At that point when goods are shipped and a receivable is generated then your p.o. finance partner expects to be paid.In summary, purchase order financing – Canada is an excellent alternative financing mechanism that in many cases can in fact work well with your current financing arrangements. Speak to a credible, trusted, and experienced advisor in this area to take advantages of situations when lack of capital is an obstacle to your future sales and profits!

Stephen Taub is a corporate financial consultant with long term experience in the financial services industry. Taub develops financial plans and executes strategies for taking over and merging with other companies.

According to Stephen Taub every organization that require expertise in finance, insurance, accounting and other aspects related to finance usually hire financial consultants. These consultants must be recognized by the Institute of Financial Consultants. There are two types of financial consulting: personal and business. Although they deal mostly with finances and investments, the skills required for these two different roles are slightly varied.

Companies hire financial consultants who have knowledge about insurance, finance, and accounting. Clients usually have specific plan and they just need an opinion from an objective third party. The consultant will be tasked to review and analyze the proposed plan. He will identify its strengths and weaknesses. Later on, the consultant is expected to offer advice on pending government regulations, risk managements, long-term viability, and industry trends.

Stephen Taub said that a good financial consultant will help you make investment decisions that are appropriate for your business needs. These days financial consulting is one of the most lucrative fields in the business world today. If you want to sink your teeth into this endeavor, it is recommended to start early for getting relevant degree and relevant experiences. You will need a minimum of ten years experience in financial planning and personal finance management before you can get started. If you already have enough experience and education, Stephen Taub recommends that you watch financial consultants in action so you can get techniques and strategies as to how you can get started on the right foot. Keep in mind that your goal here is to give your clients with the best and most appropriate advices so they’ll be able to grow their financial resources in no time.

Therefore financial consultancy is an ongoing, collaborative relationship. Your financial consultant can help you identify your dreams, create a plan tailored to your dreams, and track your progress along the way. Choosing your best financial advisor can be as important as choosing your best Physician, so compare the experience and references that you receive from several different consultants, and once you decide upon a particular one begin with a trial of their services.