Rosenthal & Rosenthal completed a $1.25 million purchase order finance facility to support the production financing requirements of an Iowa-based importer and distributor of housewares.
The company experienced moderate sales growth from both its catalog and brick-and-mortar retail customers. After a successful test order, the company was approached by a large e-commerce subscription box retailer to develop a seasonal promotional box program. Production cycle timing, a challenging shipping schedule and ongoing freight and logistics issues impacting importers from Asia prompted the company to explore factoring and purchase order financing to help mitigate increased cash flow strain. The company’s new factor introduced the client to Rosenthal to assist with structuring a purchase order financing solution.
During due diligence, the company put up an initial deposit to its supplier to start production. Early on, it appeared that purchase order financing would not be required because the company believed it had convinced its supplier to ship on open account terms, such that the supplier would be paid its balance from factoring the expected accounts receivable. Given that development, due diligence was temporarily put on hold for the purchase order financing. As the goods were about to be shipped, however, the overseas supplier unexpectedly decided it was unwilling to ship the goods without additional guarantee of payment. At that juncture, Rosenthal’s purchase order financing team re-engaged, structured a solution and completed the underwriting, legal and funding processes within three days of the request to reimplement the proposed facility.
The purchase order financing facility allowed the company to fulfill the new sales program and deliver the products on time to the subscription box retailer. Documentary letters of credit were used to fund the balance of the inventory cost payable to the company’s overseas supplier. Cash funding also was provided for fulfillment and logistics costs. The factoring of the accounts receivable created access to additional liquidity for the company over and above the repayment of the purchase order financing provided by Rosenthal, accelerating the cash flow cycle of the overall transaction.
“Rosenthal was honored to be referred to this transaction by a third-party factoring company who we have successfully partnered with on many other transactions. We were pleased to assist this growing houseware company in meeting the changing payment requirements of its overseas supplier. This transaction capital program allowed our client to fulfill the large order despite the logistics issues that all importers are currently experiencing in the post-COVID world,” Paul Schuldiner, division head at Rosenthal & Rosenthal, said. “We look forward to continuing to be a resource for growth companies as they navigate the balance between executing on sales opportunities and managing current challenges of international supply chains.”
