Monthly Archives: August 2017

How to Finance your Big Sales

It is almost like a dream come true. After working very hard at your business, you get a huge purchase order from one of your best customers. You can almost feel the sweet taste of success. Soon, however, reality sets in. If you are like most small to mid size businesses, you realize that you don’t have enough money to buy supplies because your suppliers are demanding advance payment. You now risk losing the order unless you find a way to finance it.

If your company has been in business for many years, is reasonably big and has a great track record, you will probable be able to get a business line of credit or a similar type of bank financing. If that is the case, you’ll be able to borrow money to pay your suppliers and fulfill the order. But what options do you have if you are a new business owner or if you run a small business that has no bank credit?

There is a little known and seldom used financing product that could help you in this situation. As a matter of fact, it could help you almost any time you have a big sale to a good credit worthy customer. It is called purchase order financing (also known as po funding.

Purchase order funding can provide you with the financing you need to fulfill orders from your large and best credit worthy clients. As opposed to most financial products, the only collateral that purchase order financing requires is the actual purchase order (and associated payments) from your client. The financing company will provide you with the necessary capital to fulfill and deliver the order. They get paid when the client pays for the order. This makes it an ideal product for small and mid size businesses who are growing quickly and need capital to deliver orders to their ever growing client list.

Who qualifies for purchase order funding?

PO financing is ideal for companies that re-sell a finished product at a profit. For example, import-export companies, wholesalers and distributors can certainly use this type of financing. However, if your company buys a product and modifies it before re-selling it, most probably it will not qualify for this type of financing (there are exceptions).

Although purchase order financing can be affordable if your profit margins are right, unfortunately it does not come cheap. This is because most financing companies consider the transaction to be high risk. The total cost of the transaction, from start to finish, can be anywhere between 5% and 15% of the sales price. Because of this, purchase order financing works best with businesses that have profit margins of 25% or more.

Lastly, purchase order funding only works for commercial sales in which the purchasing company has a good commercial credit score (as most large businesses tend to have).

How does the purchase order funding transaction work?

The transaction itself is actually fairly simple. Once you have the purchase order in hand you contact the purchase order funding company to begin the process. The first thing they will do is verify the credit worthiness of your customer. If the credit review is good, the transaction proceeds as follows:

1. The financing company issues a letter of credit in favor of your supplier. The letter of credit states that payment is guaranteed, provided the supplier delivers the product according to the buyer’s specifications. Almost all suppliers accept letters of credit as payment.

2. The supplier manufactures the product and ships it to you, or drop ships to the buyer.

3. The buyer receives the product and accepts it. Your supplier gets paid by cashing the letter of credit.

4. Your customer pays for the order, usually 30 days or so after receipt. The financing company is paid back for its services and all remaining funds are yours.

One of the remarkable features of purchase order funding is that in most cases, the client has few out of pocket expenses. It’s truly a transaction where you can use other people’s money to grow your business.

Lastly, purchase order financing transactions are frequently integrated with invoice factoring financing. This is a widely used trick that can help reduce the cost of financing the transactionScience Articles, thereby increasing your profits.

International Business Finance

Many firms are interested in investing and seeking finance from foreign sources and exporting goods and services to foreign countries. Overseas involvement of firms is increasing, and this trend is expected to continue. This has been stimulated by a variety of forces. First is the change in the international monetary system from a fairly predictable system of exchange to a flexible and volatile system of exchange. Second is, emergence of new institutions and markets, particularly the Eurocurrency markets, and a greater need for international financial intermediation.

In 1971, the US dollar was unlinked from gold or allowed to “float”. This brought about a dramatic change in the international monetary system. The system of fixed exchange rates where devaluations and revaluations occurred only very rarely, gave way to a system of floating exchange rates.The distinguishing characteristics of international business finance are multiple currencies, differential taxation and barriers to financial flows. Of these, the multiple currency factor and the attendant issue of exchange rates has received considerable attention, particularly in recent years. An exchange rate represents the relationship between two currencies.The procedure for evaluating a foreign investment in international business finance consists of identification of cash flows, choice of an appropriate discount rate and determination of net present value. Foreign investments generally involve higher risk, which arises from factor like changes in currency value, discriminatory treatment of a foreign company and threat of expropriation. Risk stemming from fluctuations in exchange rate looms constantly on the horizon of foreign investment. In addition, a foreign investment is subject to discriminatory treatment and selective control in various forms motivated mainly by political considerations. Finally, the threat of expropriation without adequate compensation may exist, particularly in countries where radical nationalistic sentiments are strong. In view of the higher risk associated with foreign investmentBusiness Management Articles, a firm contemplating foreign investment would naturally expect a higher rate of return.

Tips Car Finance

Plan to buy car and take it on finance. Buying a car involves comparing new car prices, features, reviews n hot discounts as offer on it. Similar is car finance which involves more than 70% of the component of car to work upon the interest rates, pre payment clause, charges, turn around time for approval and disbursement and most important the lowest deal.

Car finance in India is offered by more than 25 leading banks and Non Banking Finance companies which controls 90% of market share of the auto finance market. Start on the finance, by making a comparison on primarily 4 factors – turn around time for approval and disbursal of loan, interest rates, documentation and hidden charges like pre payment charges, loan processing fees.

The best way is to inquire online or send an offline enquiry to couple of leading banks, you will soon be flooded with there offers and deals. Ensure to read the fine points in terms of other charges so as to able to make apt comparison. If you have a descent repayment track record with good CIBIL score, chances are that you may tend to bargain for a better interest rate with the respective financier.

If you are a corporate, then may also think of leasing option which can prove economical to you keeping tax benefits vis a vis car finance. Moreover, maintenance of car would also be hassle free as the leasing company takes care of same for the lease tenor.

Car finance, should not be ignored as a part of research while planning to buy a car. A car like Honda City, having interest rate difference of 50 bps – 100 bps can cost you over Rs. 15,000 for a 5 year tenor in terms of extra interest outflow. The deal and negotiation and research been involved in buying a car, similar effort to be put in getting the best deal on car finance. Remember, car finance is part of service sector and been the number of financing institutions are so high, they all want there piece of pie in terms of higher volumes. Be aware that negotiation is a part in car finance and a deal can be customized basis requirement of customer

Second hand cars has higher interest rate as compared to new car finance and also has lower funding amount due to risk nature of lower resale value in India. AlsoFree Web Content, one can determine loan eligibility and emi through car loan emi calculator available online.

IT Support Helping Finance

How do you think about working in a finance team with no computer? You’ve got multiple duplications of digits to work on like company budgets and expenses, fiscal reports and income statements. There is several correspondence and circular to write and you’ve got thousands of documents to archive and save and much more. Without the support of computers, there’s a chance you’re working even on the weekends as it requires expanded time and energy to accomplish all the stuff.

This plainly implies that technology is very important in our everyday activity. In spite of the perception that it formed people truly dependent on technology, it can make how we live much easier specially in the daily course of business dealings. Computers become key equipment in any type of workplaces simply because can execute information with a snap of moment. They are able to store data not requiring huge file cabinets and thousands of rims of bond paper and folders. And retrieval is merely few typing the keyboard or drag of the computer mouse.

Yet, owning computers at the office does not ensure the work to be efficient. There must be networking, storage space, internet access, software program and many others. When all these are actually set, they’re going to require repairs and maintenance and replacement simply because technologies have depreciation in the process. They must be given protection since computers could be inflicted with viruses that will corrupt information and cyber-terrorist may intrude the system and gain access to sensitive data. Certain data information must be safeguarded and be accessed exclusively by exclusive people only. They require upgrading obviously because technologies are constantly evolving. The concept of latest technology is because its usability, speed and added capabilities.

When the finances are restricted or merely planned to save some money, IT support will be the ultimate remedy. Why? IT support provides all the information technology solutions necessary to establish, maintain and safeguard data files in the finance department and the business in general. IT support possesses the expertise precisely because they are concentrating on this arena.

IT support can be classified into three concerns. The first is support for software programs. This relates to the maintenance as well as updates of applications as it gets obsolete sooner or later. IT support can provide expert consultancy on how to pick correct software, updates and anti-virus. Second is support for the equipment. IT support can actually support in the setting up of computer devices like memory and networks. The physical components of computer units have charge lifespan too. Like machines, they will malfunction. Hence, they need maintenance and repair. Third is cybercrime avoidance ideas. Cyberpunks are everywhere. They spy to company data steal them, alter or obliterate the complete system hitting the organization. IT support can easily tackle this issue via data protection applying security passwords and file encryption.

Moreover, aside from the support IT support can bring, there are still two points that could immediately or not directly perk any company: expenses and focusing on the enterprise. Technology is pricey specifically when the corporation is definitely trying to keep updated on the latest innovation. Investment in It is actually a need yet It support can at any rate lessen your expenses. By allowing IT support address your requirements, it is possible to focus on the main function of the business enterprise. HenceFeature Articles, additional time and energy for company works that will soon bring about progress.