MLO NMLS #1086161 California and Minnesota - Approved-Inactive
Purchase Order Funding Program for Importers
PO Funding is where you need Factoring Company to buy the goods for you (Cash Against Documents (CAD) or a Letter of Credit) or you need to use
Factoring Company's creditworthiness for your vendor to release the goods and be paid from the Factoring proceeds (Vendor Guarantee). Remember, you can have Invoice Factoring without PO Funding, but you cannot have PO Funding without Invoice Factoring.
Vendor Guarantee is the cheapest because it is the less risky for you and Factoring Company. Factoring Company contracts with your vendor to pass enough of the factoring proceeds on to them to cover the vendor's invoice to you. Thus, it is a onetime cost of just .5-1.0% of cost of goods, not the invoice amount like factoring.
Cash Against Doc's can be FOB China or FOB US. Of course, FOB China is higher risk than FOB US and the money is out longer. Cash Against Doc's cost can be 2.5% FOB US to 4% FOB China. There is also the real risk of your vendor not meeting quality, quantity and timeliness issues. In addition, unlike Invoice Factoring, PO Funding has the risk of product rejection by the account debtor (your client).
Even though some of your clients will pay quicker and a very few before receipt, you still need Factoring Company to buy the goods for you pre-debtor (your client's) approval. This is much riskier and costlier than just factoring. However, it is based on what we must pay your vendor, not the invoice amount. Also, the higher your company’s deposit to the vendor, the less the total fee.
Note: Your goal should be to get your vendor(s) comfortable enough with you to take a Vendor Guarantee as your costs will then be reduced significantly.
What is needed to get started? A Simple One-Page Application!
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