Purchase Order Finance Case Study
Combined Finance - A Jewel In The Crown For Icon Live
US Supplier to US Buyer
You are an apparel manufacturer. You just received a large order but the suppliers of the goods will not extend any credit for the goods you need to fulfill the order. Your sales price to your buyer is $105,000 and your total cost to produce the goods is $75,000. Your gross margin is 40%. Bibby Financial Services will purchase the goods for you from your supplier, and fund the transaction. On delivery of the goods you will raise the bill for $105,000. With an 80% advance Bibby Financial Services will then clear the Purchase Order Transaction of $75,000 and there will be $9,000 available for your working capital less the Purchase Order Finance fees. On collection of the receivable you will receive the unadvanced 20% less a small fee for the receivables funding.
Foreign Supplier to US Buyer
You are air conditioning unit distributor importing units from Taiwan. You do not need to touch the goods, they will be shipped directly to the buyer, a large U.S. retailer. The cost of the goods is $500,000 and you will sell them to the buyer for $700,000. Gross margins are 30% (after all importing costs). Bibby Financial Services opens a Letter of Credit to your supplier with performance requirements for your supplier to comply with relating to delivery. When the goods arrive satisfactorily your Taiwanese supplier will be paid. When the goods are billed the receivable will be funded and the purchase order finance paid from the funds generated from the receivables funding.
What Next?
If you would like to speak with one of our Purchase Order Finance specialists simply complete our contact form. Alternatively you can call us on 877-88-BIBBY (1-877-882-4229), email us at sales@bibbyusa.com or request a call back.
