Strategic Partnership and Infrastructure
XLR8 can invest through its funding program in partnerships for business development and marketing strategies and securing opportunities for small to medium companies. Such investment programs will assist these companies by allowing them the time to develop their business without financial pressure and immediate repayments. Explore more about XLR8 Companies funding.
Purchase Order Finance
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Definition
Purchase order financing is a short-term commercial finance option that provides enough capital to pay suppliers upfront for verified purchase orders (PO).
Businesses avoid depleting cash reserves or declining an order because of cash flow challenges. It allows companies to accept unusually large orders and adjust the loan basis up or down quickly to meet needs. If order volume drops, there are no long-term commitments, so they can stop using at any time. -
How does it work?
Your business receives a large PO from a new or existing customer. Your supplier needs upfront payment, but the customer invoice won’t be paid for 60-90 days after the shipment is received. This creates a classic working capital gap. We will verify the PO and immediately make an advance up to 50-70% of the purchase order. -
Who qualifies for PO Financing?
PO financing is designed for growing businesses that want to fulfill large orders but have limited access to working capital and/or experience irregular cash flow. - The types of business that usually qualify include:
- Distributors
- Wholesalers/resellers
- Importers/exporters
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How is it different than bank financing?
PO financing is a short-term commercial finance option that provides capital to pay suppliers upfront for verified purchase orders. Businesses avoid depleting cash reserves or declining an order because of cash flow challenges. It allows companies to accept unusually large orders and adjust the loan basis up/down quickly to meet needs. If order volume drops, there are no long-term commitments, so they can stop using it at any time. -
How much does it cost?
The cost of financing purchase orders varies for each transaction based on risk(s). The monthly percentage is based on the lenders underwriting factors such as:
- Distributors
- Wholesalers/resellers
- Importers/exporters
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How much is it worth?
What’s most important is mearing the cost against the risks and benefits. If you decline the order, how does this reflect your company’s growth? Many businesses believe it’s worth a percentage of their profit margin to make a sale that can be equivalent to an entire year’s worth of business. -
How long does it take?
From the time you submit the application and due diligence materials, it takes approximately one week to underwrite and another week to establish a funding and repayment mechanism. We have funded transactions in as quickly as 10 business days.
Account Receivable Financing
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Why do I need it?
Your business delivers goods to the end customer. Upon receipt, the end customer is issued an invoice. In order to create liquidity to pay vendors, working capital is needed right away. You can sell your invoice or receivable to us for a discounted fee to access immediate liquidity. Distributors, wholesalers, and trucking companies would all qualify for account receivable (AR) financing. -
How does it work?
Your first step is to submit a valid invoice. Once verified, we advance 70-90% of the invoice to you. Upon payment from the customer, we will net our discount fees and immediately wire you the balance. You can choose which invoices you want to be factored in or elect to get a revolving line of credit against your entire receivable pool. We are flexible based on what is best for your company. -
How long does it take?
From the time you submit the application and due diligence materials, it takes approximately a week to underwrite and another 1-2 weeks to complete the account debtor notification process. We have funded transactions in as quickly as 14 business days. -
How much does it cost?
As with PO, the cost varies for each transaction. The monthly percentage is based on:
- The creditworthiness of the account debtor
- History of payments with the account debtor (do they force discounts for late shipments)
- Consignment and performance standards in contract with the account debtor.
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Is it worth it?
While there is a cost associated with these financing tools, how much more profit could you earn or how many expenses could you save with added liquidity? Usually, the earned revenue is more than the cost of the funds, which is beneficial to any business.
Inventory Finance
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How does it work?
We will evaluate the liquidation value of the equipment or inventory and assign a value. You can elect to draw down on the line at will and only pay the interest costs monthly, which is similar to a home equity line of credit. -
Why do I need it?
If you are looking for a line of credit and are sitting on significant equipment or inventory, you can leverage those assets by securing an inventory line. Proceeds can be used for acquisition, unexpected expenses, or general working capital needs. -
How much does it cost?
As with all asset-based lending, the cost varies for each transaction. The monthly percentage is based on:
- How liquid the inventory is (liquidation value).
- Where it's located (centrally vs. spread out).
- Whether or not it's perishable or fad-related.
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Why is it useful?
Inventory financing is a good way to leverage existing goods for additional purchases. Unlike AR or PO, this functions more like a traditional line with interest-only payments until maturity for only the portion of principal you drawdown. -
How long does it take?
From the time you submit the application and due diligence materials, it takes approximately a week to underwrite, after which an appraiser is sent to value inventory. To close, the process takes approximately 3-4 weeks.
