TradeCap Partners closed a $500,000 purchase order facility for a New York-based clothing and footwear apparel importer that sells through retail channels in the United States.
The impact of tariffs hindered the client’s ability to meet price points and margin requirements retailers were demanding as a tradeoff for growth in purchasing volume. In order to improve margins, the client made the decision to move a large portion of its production to a new supplier outside of China. Given the net positive margin impact as a result of eliminating tariffs, the Client was able to secure large orders from a big box retailer it had been working to grow its relationship with in prior years.
The client worked with the new supplier to establish favorable payment terms, however, based on the size of the initial order and new relationship, the supplier demanded either cash deposits or an irrevocable letter of credit to support the cost of production. The client didn’t have sufficient receivables to borrow against and the senior lender wasn’t comfortable providing an ‘over advance’ to accommodate the immediate funding needs. The lender felt more comfortable referring the client to TradeCap, a partner it had worked with in the past that could expedite the client’s request and properly structure the transaction.
TradeCap advised the client of the pitfalls associated with providing cash deposits to overseas suppliers and structured a letter of credit to ensure quality goods were sourced in a timely manner to meet delivery dates of the client’s customer. The transaction was underwritten quickly in order to maintain the time sensitive shipping schedule of the customer. TradeCap closed the PO facility within a week and issued an irrevocable letter of credit with terms acceptable to the overseas factory. The senior lenders partnership with TradeCap allowed them to provide a solution and further strengthen their client relationship.
TradeCap’s purchase order funding solution enabled the client to successfully execute on large orders from a valued customer and set the stage for significant growth in 2020.
“We very much value the relationships we have made with banks, asset-based lenders and factors across the country over our 30+ years in the Purchase Order funding space. We’re grateful for the confidence and trust our referral sources have in us to provide a quick response and execute to meet the funding needs of their customers,” said Bryan Ballowe, TradeCap’s managing partner.
