Rosenthal & Rosenthal completed two purchase order finance facilities to support the financing requirements of two international apparel companies.
The first transaction involved a New York- and Asia-based private label apparel company known for the quality of its international sourcing capabilities, which was approached by a large discount retail chain to develop a private label program for its national chain of stores.
After initial successful test orders, the retailer provided sales orders for product to be shipped on an FOB Asia basis and placed the company in its supply chain finance program, which is operated and funded by an international bank. While the supply chain receivable finance program enabled the company to grant the retailer longer payment terms in exchange for low cost accounts receivable financing, it did not solve the pre-shipment production financing needs of the company.
Rosenthal structured and funded an $850,000 PO facility, consisting of issuing letters of credit to Asia-based suppliers to cover 100% of the cost of the required inventory. An inter-creditor agreement was established with the international bank supply chain finance provider as the repayment source for the PO financing, which provided an economical solution to funding the production-to-delivery cycle for the growing company.
The second transaction involved a European- and New York-based designer and importer of branded street wear. The company’s products were experiencing worldwide growth, which required production financing alternatives that did not require raising additional capital. The company’s factor suggested PO financing as an alternative, given the insufficient level of open credit terms to manufacture and import the product.
After a quick review of the situation, Rosenthal provided a $1 million PO financing facility. The supply chain financing requirements of the transaction involved the purchase of product from the company’s various overseas suppliers via letters of credit and documentary collection financing as well as funding fulfillment and logistics costs.
Rosenthal’s advance rate was 100% on the cost of the presold inventory and the resulting repayment from the company’s factoring facility will occur as goods are delivered and invoiced to the company’s retail customers.
“Companies in the apparel industry are facing great challenges right now, many of which are affecting their supply chain and their ability to maintain their gross margins. Rosenthal is finding solutions to help navigate this changing landscape,” said Rosenthal division head Paul Schuldiner. “PO financing continues to prove to be an invaluable cash flow tool for companies to take advantage of incremental sales growth opportunities while maintaining gross margin throughout their worldwide markets.”