B2B Business owners often ask us about the different lending products we offer. The short answer is: Accounts Receivable financing, Purchase Order financing, Lines of Credit, Term Loans, and Bridge Loans.
With that said, it’s important for us to schedule a “Discovery Call” to better understand your business, so that we can determine the best option for your particular situation.
To schedule a call, please email: jeffseverson@primaryfunding.com
Below is a Q & A about our different products.
What is Accounts Receivable financing, otherwise known as factoring?
Accounts Receivable financing, or factoring, refers to the selling of an account receivable (invoice) at a discount in order to get immediate cash.
How can factoring help?
Are you providing payment terms of 30, 45 or 60 days to your customers? Is this creating cash flow issues that make it difficult to satisfy payroll, vendors or other needs? Is lack of cash preventing your growth? Factoring your invoices gives you immediate access to cash to keep you in good standing and help you grow. In general, the total cost of factoring is 2 – 3% of the invoice, depending on how long it takes for the invoice to get paid. Be careful of teaser rates and competitors that offer what appears to be a low rate, but you find out later that it is not what was presented. We have straight-forward pricing that you will understand. No gimmicks. No smoke and mirrors.
Example:
You provide us with a $5,000 invoice today for work that has been completed. We give you up to $4,500 today. In 30 days, we collect the $5,000 from your customer. We keep approximately $100 and give you the remaining $400. In the end, you’ve received $4,900 and we received a fee of $100. In addition, we provided collection services for you, which frees up your time and resources to do more important things!
What is Purchase Order financing?
Purchase order financing is an alternative financing solution that businesses with POs can use if they’re short on working capital. It can be useful for small- to medium-sized and emerging consumer goods brands who need capital to pay suppliers to fulfill large orders and grow their business, without having to deplete their cash flow.
Purchase order financing uses POs as collateral to secure funding. It’s a unique financing opportunity that lets you capitalize on income you’ll earn, but haven’t yet collected. It can give you some breathing room if you don’t want to take out a high-interest, more traditional business loan or dip into earned revenue that could be used for a host of other operational and business-related expenses.
How can Purchase Order financing help?
If you have a number of orders come in, or even just one large order, and you think you’ll have a difficult time paying your supplier up front to get the order processed and moving, you can utilize PO financing to ease pressure related to cash flow problems, until accounts receivable are collected.
Purchase order financing can be an effective way to reduce credit reliance and become cash positive. It can eliminate the gap between the time you submit a PO, and when an invoice is processed, fulfilled and paid so you can settle up with your supplier.
PO financing can offer a competitive edge. It can allow brands to remove roadblocks as they try to compete against huge brands with tons of buying power. Not having to rely on supplier credit, increasing your working capital, can really be a game-changer as you grow your brand and increase your reach.
With PO financing, you don’t need to sell equity in your brand, making this a much-preferred option for those business owners not wanting to trade ownership for capital.
What is Asset based lending?
Asset Based Lending generally refers to providing a line of credit that is secured by accounts receivable, inventory or equipment. The availability on the line of credit is determined by these assets.
How does an Asset Based Line of Credit work?
With an Asset Based Line of Credit, you can borrow money in an amount that is determined by a Borrowing Base Certificate, or BBC. You would complete a BBC periodically (generally monthly) that will show how much you currently have in accounts receivable and possibly inventory and/or equipment. We allow you to borrow 80% to 90% of your outstanding A/R and possibly an additional amount against your inventory and/or equipment.
How can PFC’s Asset Based Line of Credit help?
We can help you sleep better. We can provide you with the capital you need to manage and grow your business. Without enough funding, you may be restricting your company’s ability to grow. It is very important to make sure that you keep vendors current, have funds to make payroll and maintain adequate inventory. Primary Funding provides Asset Based Lines that are based on your accounts receivable, inventory and equipment. You can sleep better at night knowing that you have access to the funds you need.
What about Term Loans?
A term loan is a loan that is repaid in regular payments (usually weekly or monthly) over a set period of time. Primary Funding generally provides term loans that are repaid anywhere from 6 to 18 months but may be longer in some cases. Term loans are a great way to provide an injection of working capital that gets paid back over a period of time allowing a company to take on new initiatives that will grow profits.
One thing to consider when getting a term loan is whether the interest rate is fixed or floating. A fixed interest rate means that the percentage of interest will never increase, regardless of the financial market. Low-interest periods are usually an excellent time to take out a fixed rate loan. Floating interest rates will fluctuate with the market, which can be good or bad for you depending on what happens with the global and national economy.
What about Bridge Loans?
A bridge loan is basically a short-term loan used by a company to “bridge” a temporary cash gap. These loans are also known as a swing loan, gap financing, or interim financing. A bridge loan is typically repaid in 3 to 6 months but can extend longer. These loans will always have a well-defined and reliable repayment source. A bridge loan essentially “bridges the gap” between the time funds are needed, and generally when funds are expected that will pay off the obligation in full.
