For many entrepreneurs, there are few things more debilitating than winning a contract to supply goods and not having the capital to fulfil the order.
As a growing business concern, your cash-flow is the most critical aspect of your business – it often feels like there is more “flow” than “cash” in your business. It’s a balancing act trying to get suppliers to advance you the goods without having to part with your hard-earned capital and then actually waiting for the client to pay you.
Many entrepreneurs are not aware that there has been a significant amount of innovation in the sector with a number of services including tender fulfilment and purchase order funding solutions being made available to growing entrepreneurs.
These could take the form of:
- A funding partner effectively taking responsibility for fulfilling your order at the best possible price and take a portion of the margin on the deal
- Credit extended to you against the purchase order / contract
In other words, they will play “Banker” on the transaction and use their financial muscle to help you develop your financial resources.
Typically funders will be looking for a couple of elements when considering who they will extend credit to:
- Who has issued the purchase order: Is it government? Is it a blue-chip client / corporate?
- Is it a legitimate purchase order (A “letter of intent” is considered less credible)
- Is it for the delivery of physical goods or is it a services based contract?
- Does the firm that they are lending to, have a trading history (typically will require a minimum of 1 year trading history and annual financial statements).
If you have recently won a tender or major contract and need a cash-flow solution to help you fulfil the order then consider looking at this as a way to develop your financial resources.
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