HFF Capital

Description

Purchase Order or Contract Financing is used to pay suppliers, laborers, or other intermediaries for goods or services, or to generate additional sales. The collateral, or ‘guarantee ’ is a contract already signed with a client for a job to be done or already in progress. Given the strength of that collateral, the bank or financial institution will accept to fund the contractor of the project. Once the company finishes the job and is paid by its client, it repays the loan. In some instances, the contract payment is assigned to the bank, in which case the financial institution will get paid directly by the client. The company receiving the proceeds of the loan can use those funds for working capital, that is, to pay for suppliers, labor and materials for the project, or to invest in other projects, thus increasing sales. This type of financing will enable companies to take advantage of sales growth opportunities that are larger than they can finance internally. The focus is not necessarily on the balance sheet of the company, but rather the underlying transaction and its economic and commercial viability. With a purchase order or contract financing, corporations are no longer hindered by the lack of working capital to get deals done.

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