As we observe the various issues and events affecting business owners, the economy, both domestically and internationally and the American public as well, one could view the situation in both positive and negative terms.

• Bank failures now number over 70 year to date and business bankruptcies, especially for smaller businesses, are on the rise.
• Credit remains tight for many business owners who, although they have experienced a pick up of business, still remain cautious regarding hiring, capital expenditures, marketing etc.
• Consumer spending has increased in certain segments such as electronics, but overall remains weak.
• Economic reports cite nominal progress as to home sales and a lessening of the total monthly unemployment claims.

While the stock market had made substantial gains over the last year, economic upheaval in Greece and the EU have roiled the markets as of late and it remains to be seen if the recently announced bail out program will have the desired effect. Domestically, large Wall St. firms have come under intense scrutiny as to their role in triggering and/or perpetuating the financial collapse that culminated in 2008. Adding further potential stress on the economy is a growing environmental catastrophe in the Gulf of Mexico. Topping off this multifaceted scenario is the legislative circus known as Washington politics. All in all, we’re walking a thin line between a progressive recovery and a retracement into economic weakness. 

While the aforementioned scenario paints a challenging and confusing picture, many business owners are actually experiencing growth spurts, with some being substantial.

Unfortunately, with banks using a cash flow formula to assess credit levels and availability, in many instances they can’t accommodate the client’s credit needs at such an accelerated pace. This presents a vexing conundrum for the business owner – they have real growth opportunities, usually in the form of an inordinately large purchase order, but don’t have the cash flow or available credit to allow them to seize the opportunity to secure a new customer or expand the scope of the relationship with a current customer.

With PO financing, up to 100% of the cost of the goods can be paid to the supplier, allowing the business owner to fill the PO on a timely basis and potentially negotiate better pricing from the supplier. It works best with finished goods, shipped directly to the customer. When the invoice is created, the factor will repay the PO financing out of the invoice advance and remit the balance, less fees, to the client. Because fees are paid on both the PO financing and factoring, the client should have a gross profit margin of at least 25 – 30%.

With the PO financing infrastructure in place, the business owner can confidently pursue larger transactions/POs and take his company’s sales to new levels.

As always, I welcome the opportunity to work with any client or prospect where you deem my services to be appropriate.

Tom Stamborski
(847) 842.3300
tstamborski@liquidcapitalcorp.com

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