To Small Van Courier providing deliveries in Ireland.
To Small fashion importer and exporter
Let’s say you run a distribution company that distributes clothing to department stores. Your company is only small, but it is growing and has a good reputation, and as a result you’re thrilled to receive a massive purchase order from a huge retailer.
This is naturally great, but there’s one problem: you don’t currently have enough cash reserves to enable you to fulfil the purchase order. Essentially what this means is that you don’t have enough to pay your manufacturer for the clothing that you need to then distribute. As a result you are quite worried that you won’t be able to fulfil the purchase order and that you will lose the valuable business to someone else.
This is where purchase order financing could well help your distribution company. What you do is you go to a purchase order financing company and they are then the ones who fulfil the purchase order. This will usually be done on your behalf through a letter of credit, meaning that the manufacturer knows they will be paid for their products and the clothes are distributed as they need to be to the large retailer.
The steps for the purchase order financing process will naturally vary depending on your specific circumstances, but here is an outline of what is likely to happen:
Whether your distribution company is able to use this type of financing will often be dependent on the creditworthiness of your customers, so this is something to bear in mind when considering the option. However, for many companies it offers a good short term solution to ensure that orders can be fulfilled, which over time can allow companies to grow and develop further.