How Does a Start-up Obtain a Large Line of Credit?

Jun 15

07:35

2012

Lanette Tucker

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For over 18 years, Paragon Financial Group has provided working capital solutions for growing companies throughout the US. They serve small to large-size companies across a wide variety of industries through accounts receivable, invoice factoring and purchase order financing up to $3 million per month in volume. Paragon is a leading source for receivables financing, government contract financing, payroll funding, and purchase order financing. For more information visit www.paragonfinancial.net.

Lets take this scenario, a Wilmington, Delaware start-up company imports a wide variety of area rugs and just received a very large order to sell to big retailers across the United States.   They are in desperate need of cash to be able to pay their suppliers overseas.  Their retailers are painfully slow in processing payment and the rug importer does not get paid in timely manner.   This scenario has been become all too common and presents several large challenges with today's ultra tight lending practices. They need to get a credit line in order to take on this new and very large order that is going to take them to the next level of success.  The company approached their CPA to discuss alternatives to bank loans.  How would they improve their cash flow, efficiently make payroll and position themselves to properly grow without having access to a bank loan?The CPA recommended they look into a factoring company that is familiar with their industry.  They researched a variety of factoring companies and did choose a factor for their experience in the import/export arena and their personable approach.   A factoring company familiar with their industry is the perfect solution for the importers situation.  A factor will purchase their existing purchase order or accounts receivables allowing the company to obtain immediate cash payment of the accounts before they fulfill the order.Factoring differs from borrowing in that the accounts receivables are actually sold rather than merely offered as collateral. The net result is that your company can convert its receivables into immediate operating cash so that you will not have to wait 30, 60, 90 days or more for your customers to pay.Factoring is a way for businesses to inject cash into their companies without taking on additional debt. By selling their accounts receivables or purchase orders at a discount, they can get money right away without having to wait to collect it themselves.  Without factoring, they would not have had the cash they need to take advantage of the opportunity and move forward.   The factoring line of credit enabled the Delaware company to pay their suppliers in a timely manner, and grow their business knowing they have the resources in place to take on larger contracts.  They can comfortably move forward with the exciting growth opportunity and take on the very large order from the national, big retailer.  Not worrying about cash flow and how to pay their suppliers, payroll funding or basic business operational costs.

Article "tagged" as:

wide variety

purchase order

factoring company

accounts receivables

large order

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Finance