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