The ideal purchase order financing transaction involves three one's. One supplier, who sells the goods to One Re-seller (our client), who sells the goods to One Customer. Why do PO financing companies prefer this type of transaction? Well, because it's simple. They pay the single supplier and the transaction ends when the single client pays.
Life is seldom simple, though.
It's not unusual to have a transaction with more than one supplier. Some of these can be done - others can't.
What CAN (usually) be done:
If you have an order for a number of products, and there finished products have to be ordered from multiple suppliers you may be able to finance your order if (and only if) your customer is willing to accept and pay for partial deliveries.
Why must your customer be willing to accept and pay for partial shipments? Imagine what happens if one of your suppliers fails to fulfill the order. You'd be stuck with the partial order and without the ability to get paid for it.
What CANNOT (usually) be done:
Same scenario as above but instead of one supplier, you have a supplier chain. You have a supplier chain if you are using a series of third party suppliers, who sell you parts that have to be then assembled into a final product. In other words you have supplier dependencies - suppliers who depend on the performance of other supplier. If your transaction has these dependencies, chances are that your order will be close to impossible to finance.
This may seem very inflexible. But there is a reason for the inability of po finance companies to fund these types of orders. Imagine what would happen if one of your suppliers fails? It can be a parts supplier or the assembly supplier. Either way, you end up with unfinished or shoddy product. However, the purchase order funding company will still have to pay the suppliers that performed well. Basically, they are out of money (paid to some suppliers) with no product for you to sell. This is just too risky. Other business financing solutions, such a business loans may work though.
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4/9/10
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