Frequently Asked Questions Regarding Business Financing from Ashford
- What is Purchase Order Financing?
As an example, client XYZ gets orders from End-Buyers (i.e. retailers, boutiques, etc) in the amount of $200,000. Client XYZ must pay $100,000 to purchase the goods. In this case, Ashford would issue a Letter of Credit or pay the supplier for the total cost of the goods ie $100,000.
- What is the difference between a Factor and Ashford Finance?
Factors only advance funds against invoices after the importer has purchased the goods. Ashford not only finances the receivable but also purchases the goods from your supplier. If you are already factored, we will work with your factor so that we purchase the goods and the factor advances you on the accounts receivable.
- What is the difference between a Bank and Ashford Finance?
Banks lend money based on the borrower’s balance sheet and equity. Ashford will finance a transaction based on its merit alone.
- What if my supplier does not require a Letter of Credit but prefers payment on collection basis?
We can use our facilities to wire funds to the supplier.
- What are the advantages of using a Letter of Credit?
A Letter of Credit protects all of the parties in the transaction. It protects the importer / exporter by guaranteeing that the goods are made to the specified standards and shipped on time. At the same time, the L/C benefits the supplier by ensuring payment will be made upon the successful completion of the order.
- Does Ashford Finance provide any other benefits to the borrower?
With an extensive background in all aspects of trade finance, Ashford provides logistical management as a part of every transaction. Issues such as credit-checking, invoicing, tracking and collection come standard in addition to 100% financing.
- What if I have many small Purchase Orders?
We are able to group many small orders under one Letter of Credit as long as the goods are produced by the same supplier. This is a common scenario for many of our clients.
- What is the danger of using Supplier Financing?
It is very dangerous to use supplier financing for several reasons: a) The importer is always under the control of the supplier and might end up being bypassed easily or being a glorified agent of the supplier. b) Being a captive buyer of the supplier, the importer does not have the ability to get the best deal from the supplier. c) In times of economic down turns or credit crunch, the supplier might not be able to continue financing the importer which could be fatal for the importer. d) When the supplier is giving terms to the importer, the supplier will not give priority to the importer but give priority to other buyers who have opened LCs or are capable of paying on their own. This means that the captive buyer often does not get their goods on time or in proper quality or quantity. However with financing provided by Ashford, all the above risks are neutralized. With their own financing, the importer is independent from the supplier, can negotiate with any supplier from a position of strength and is able to get the best deal. If there is a credit crunch in the supplier’s country, the importer with his/her independent financing from Ashford, can source goods from another supplier or another country. When the importer opens their own letter of credit through Ashford, the supplier will make sure that it delivers on time so it can get paid under the LC. Ashford’s financing provides the importer vital independence and financial strength to manage their own destiny.
- How is Ashford different from Venture Funding?
Ashford provides transactional venture capital without any equity dilution. Venture capital funding will always lead to equity dilution. With Ashford’s unique financing, the borrower can grow with unlimited funding for qualified transactions without any loss of equity.
- What is the main advantage of using Ashford’s funding?
Ashford provides unlimited funding to its borrowers to grow without any loss in equity. Moreover Ashford’s financing provides its borrowers the financial strengths to mange their own growth.
- How long does a typical transaction last?
From 90 to 120 days if the transaction involves both PO and receivable financing. If just PO then about 30 to 60 days. It can be shorter if the transaction involves air shipment or is a domestic transaction.
- If you are doing PO financing do we also have to factor the receivables with you?
No. In some cases, the PO amount is about 75% to 85% or more so there is no room for factoring. In those cases, Ashford just funds the transactions till we get paid by the end buyers. In some cases, there is a Factor or Bank involved who will do the factoring and take out Ashford once the goods have been delivered and invoiced. Generally, if there is no Factor involved, Ashford will finance the whole cycle from paying for the goods to carrying the receivable and payment by the end buyer.
- What if we’re already Factored?
We welcome companies that are already factored. Ashford Finance works with many Factors in a seamless fashion, where we finance the purchase of the goods and once the goods are shipped to the end buyers and invoiced, the Factor takes over the transaction. Factors are a great source of leads for Ashford Finance. A Factor benefits from working with Ashford because: a) Ashford’s Purchase Order financing generates more invoices for the Factor to discount and b) More importantly Ashford’s shipment specific financing generates valid transactions. Fraudulent invoices, one of the biggest risks in factoring, are highly unlikely.
- How is Ashford Finance useful in the restructuring of a company’s finances?
Ashford often works with banks and other financial institutions in the restructuring of their borrowers because of a deterioration of the borrower’s finances; high growth of the borrower leading to funding needs that cannot be satisfied by the bank or the factor; or bank / factor’s own desire to reduce the line to the borrower. In these situations, Ashford Finance, at their own risk, finances incremental new inventory to generate incremental sales for the borrower. Ashford is willing to take the risk which the Borrower’s Factor and Bank is unwilling to do. The positive cash flow generated from the Ashford funded transactions are all incremental cash flow which can be used to pay down or make the bank loan current or take the Factor out of a perpetual over advance situation.
Contact Ashford Finance for your Purchase Order and Trade Finance needs.
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