Equipment financing/leasing is one option. Equipment lenders help small and medium-sized businesses get equipment financing or equipment leasing, even if it’s not available through their local bank.
A wholesale distributor’s goal is to find a leasing firm that can meet all their financing requirements. While some financiers prefer companies with excellent credit, others will consider companies with poor credit. Financiers may only focus on companies with a high level of revenue (more than 10 million). Others focus on smaller transactions with equipment costs under $100,000.
Equipment as low as 1000.00 can be financed by financiers. It can also cost as high as 1,000,000. Look for low-interest lease rates, and look into equipment lines of credit, sales-leasebacks, and credit application programs. Get a quote for a lease the next time that you are in the market.
Merchant Cash Advance
Wholesale distributors of produce are not likely to accept credit or debit cards from merchants, even though this option is available. Their merchants will need to have the money to purchase the produce. Merchant cash advances can be used to purchase your produce by merchants, which can increase your sales.
Financing/Accounts Receivable Financing & Purchase Order Financing
Factoring or purchasing order financing wholesale distributors of produce is one thing that is certain: the simpler the transaction, the more PACA comes into effect. Every deal is treated individually.
Are PACA and other problems a problem? Answer: It is up to the grower to unravel the process.
Factors and PO. Financers don’t lend on inventory. Let’s say that a distributor sells produce to two local supermarkets. Produce is perishable so accounts receivables usually turn quickly. It all depends on the source of the produce. If the sourcing happens with a larger distributor, there won’t likely be any issues for purchase order financing or accounts receivable financing. If the sourcing is done directly through growers, financing must be more careful.
A value-add can make a situation even more appealing. Example: Someone buys green, red, and yellow bell peppers from many growers. These people are packaging the items and selling them as packaged goods. Sometimes, the value added of packaging, bulking and selling it can be enough to satisfy the factor or PO. Financers will be more inclined to consider this a favorable option. PACA is not applicable if the distributor provides enough value-add to the product.
A distributor might also be an example. They could take the product, cut it up, and package it for distribution. This could have potential because the distributor might be selling the product directly to large supermarket chains. The way they source the product and how they use it after they have sourced it will impact. This is where the factor, or P.O., really matters. The deal will be viewed by the financer, who will not know this information until it is reviewed. This is why individual cases can be considered touch and go.
What is possible under a purchase order programme?
P.O. Financers love to finance finished goods that are dropped off to their customers. Financers are more adept at financing if there is only one customer and one supplier.
Let’s suppose a produce distributor receives a lot of orders, and sometimes the product is not financially feasible. The P.O. A financer will need someone who has a large order (at least $50,000.00) from a major supermarket. The P.O. The produce distributor will tell the financer: “I buy all the product from one grower at once so that I can bring it over to the supermarket. I never touch the product.” I won’t take it into my warehouse, and I won’t do anything to it such as wash it or pack it. The only thing that I do is to get the order from the supermarket. I then place the order with the grower, and the grower drops it off at the supermarket.
This is the perfect scenario for a P.O. financer. The distributor does not touch the inventory and there is only one supplier. This is a deal killer (for P.O. When the distributor touches inventory, financing is not possible. The P.O. The grower will have been paid by the financer for the goods, so the P.O. Financer will know for certain that the grower was paid, and then the invoice can be created. The P.O. The P.O. might also be done by a financer, or another lender (either an asset-based or factor lender). P.O. Financing always comes with an exit strategy. It is usually another lender or the company who did the P.O. funding who can then factor the receivables.
Simple exit strategy: Once the goods have been delivered, an invoice is generated and someone must pay the purchase order facility. It’s easier if the same company handles the P.O. Because there is no inter-creditor agreement, financing and factoring are not required.
Sometimes P.O. Sometimes financing is impossible but factoring can.
Let’s suppose that the distributor purchases from several growers and carries a variety of products. It will be stored and delivered by the distributor based on what their clients need. This would not be eligible for P.O. P.O. financing is not available. Finance companies will not finance goods that are going into their warehouse for inventory building. Factors will also consider the fact that different growers are buying the goods. Factors understand that growers who don’t get paid are subject to mechanics lien. Anyone caught between the buyer and the receivable can have a lien placed on it.
It is important to ensure that suppliers get paid. PACA was established to protect farmers/growers in America. The financer won’t be able to determine if the supplier is the end-grower if they are not.