Paragon Financial Group is funding during the COVID-19 crisis.

Financing for Big-Box Retailer Suppliers

Financing for Big-Box Retailer SuppliersHow many entrepreneurs watch Shark Tank and wish they could go from rags to riches overnight?  The sharks dangle their deep pockets and connections with the “Big Box” retailers as the prize everyone wants to attain.  A partnership with a “shark” provides the dream contacts and funding every entrepreneur longs for.  The vast majority of small business owners grow by their own devices.  Contacts with the giants, such as Walmart, Target, Sears, Costco. Kohl’s, Staples, Office Depot. Toys “R” Us and Michael ’s are more often established by persistently marketing products or lines of products to corporate buyers.  Assuming the contact is successful, large purchase orders can ensue at a lightning pace.

The step-up from modest production to large purchase orders can represent a considerable challenge for a growing business.  Owners must adapt overnight from running a small business to managing a medium-sized business.  They find themselves needing to purchase more raw materials. Also, they need to hire additional staff and purchase equipment or find a way to outsource their production.

The need for funding can become enormous as soon as the contract is signed with the “big box” retailer.  Often, these suppliers are in a startup stage and have not established credibility to borrow such significant sums from traditional bank financing.  They are essentially moving from one phase of business development to the next overnight. However, they are unable to show traditional lenders the track record required to borrow such significant sums.

Purchase Order Funding for Small Business

Purchase order funding can offer an appropriate source of working capital for the small business to leap more significant transactions.  Money is advanced based on either a single or multiple purchase orders. Also, advances are made based on the creditworthiness of the purchaser rather than the supplier.  Suppliers without established credit or with credit issues (sometimes even IRS issues) can receive working capital upfront from fulfilling their newly acquired orders.

Accounts Receivables from large retailers such as Best Buy, JC Penney, Books-A-Million, Bed Bath and Beyond, Old Navy, Petsmart, and other superstores can be notoriously slow.  Upfront terms of 60 days or more are standard.  This lag in collections can cause a severe deficit in liquidity. This is especially true upon receiving any additional orders.  The pressure to reinvest in future sales creates a critical need for working capital.

Accounts receivable factoring can provide an additional source of working capital.   The factoring company purchases the actual receivables from the supplier. After that, the company advances a percentage of funds upfront (up to 90% of the balance) based on the strength of the retailer, rather than the supplier.  The availability of the funds can fuel the next round of inventory production, rather than waiting for the collection process to take place.

Paragon Financial specializes in managing liquidity in today’s competitive environment. We offer 27 years of experience providing funding for working capital needs by advancing on accounts receivable and purchase orders. Give us a call at 888-400-5931 today, fill out the form to the right, or chat with us.

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Financing for Big-Box Retailer Suppliers

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