Summar received a call from a company that needed cash on hand in Latin America that required two services:
- Get funding from their sales invoices from both a US client and a Chinese client
- Get cash or an advance twice a year in the middle of their peak seasons to be able to pay local fisherman for the product being delivered to the plant.
The client explained that his business was seasonal and he needed to have sufficient availability of funds to be able to purchase as much product, as it was available to him, when required by the fishermen so that he could in turn process the product and convert it into sales. If he didn’t have the cash available to purchase the product, it would just go to his competitors who will seize the opportunity and purchase the products instead of him.He had been growing at a decent rate for the past years but he knew that with a steady cash flow or additional capital to purchase the product at the right time, his sales would multiply and he would have a great year.
At Summar this is a perfect example of a factoring and P.O. finance scenario. What we refer to as additional funding is what we call direct P.O. finance, which allows the client to get additional funds based on factored volume and sales cycles.
On the other hand, the Chinese client had payment terms CAD. CAD means cash against documents whereby the client will pay for the goods against the delivery of the original bills of lading, which allows him to take possession of the purchased goods. This transaction is done through banks whereby the documents are received by the bank of the buyer and only delivered to him after payment is done to the bank of the factor or the seller. This usually seems to be a safe way to get paid for your product and it is widely used in international commercial transactions, but the problem is that our client did not want to wait the 40 to 50 days that the boat takes to get from Central America to China and for the client to pay for the documents to be released. The client in China would wait for the boat to arrive to the Chinese port before he paid to release the documents. It does not make sense for him to pay before, while the goods are still on the boat.
With Summar’s invoice factoring we helped this Latin American client finance these transactions by helping him receive immediate liquidity upon delivery of the original documents.
As a result the client grew faster year after year with happy vendors and happy clients.