ABL and other forms of International Finance
Overview:
ABL and other forms of international finance
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Purchase order financing
Supply Chain financing
Vendor leasing
ABL and inventory financing
ABL and equipment financing
Equipment finance and inventory financing
Factoring and inventory financing
Logistics financing and factoring
Multi-jurisdictional financing
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Overview:
ABL and other forms of international finance
Purchase
Order
financing
Purchase Order Finance is short term
transaction-based financing that allows
companies to purchase or manufacture goods
that have been presold to their credit worthy
end customers.
Supply
Chain
Financing
The integration of receivable and payable
purchase and discounting schemes that can
include inventory financing and equipment
financing all designed to deal with the
inefficiencies and opportunities in a clients
supply chain.
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Overview:
ABL and other forms of international finance
Contract
purchase
Purchase
order
financing
Multi
jurisdictional
financing
Vendors
Logistics
financing
Asset
Based
Lending
Supply Chain
Finance
OEM
Vendor
leasing
Factoring
END USERS
Cross Border Supply Chain
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Overview: Supply Chain Finance
Asset Based Lending, factoring and leasing go
hand in hand to deliver a supply chain financing
solution.
– Cater to the entire flow of Clients supply chain
– Vendor settlement
– Payables acceleration
– Receivable funding
– Inventory financing at multi-vendor hubs
– Floor planning
– End User financing
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Overview: Supply Chain Finance
Specialization
Sector specific
Solutions based
Low cost to serve
Integrated business
processes
Technology connection
with clients
Client Self help essential for
superior customer service
and lower cost to serve
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Overview:
ABL and other forms of international finance
Vendor
Leasing
Also called sales-aid finance, vendor leasing in
the U.K. features relationship management,
back-office support and marketing assistance.
Private-label (“dual naming”) vendor leasing is
also utilized.
Asset-Based
Lending and
Inventory
Finance
Value-added resellers in the U.K. information
technology and telecommunications markets
make use of asset-based lending (invoice
discounting) in conjunction with, or in lieu of
inventory finance, especially when they have a
high percentage of “outbound” sales.
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Overview:
ABL and other forms of international finance
Asset-Based
Lending and
Equipment
Finance
Term debt with equipment as collateral is
often desired in conjunction with short-term
revolvers that are secured by accounts
receivable and inventory.
Equipment
Finance &
Inventory
Finance
Manufacturers distributing equipment through
dealer networks in the U.K. may have a need
for both inventory financing and end-customer
equipment finance. Such programs can
provide “dividends” that vendors apply toward
future inventory purchases or paying down
interest charges.
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Overview:
ABL and other forms of international finance
Factoring &
Inventory
Finance
Manufacturers distributing through dealers can
borrow on invoices to inventory financing
dealers in advance of the due dates. Dealers
in turn can be provided with extended-term
financing for their purchases from
manufacturers.
Logistics,
Financing &
Factoring
Logistics companies in the U.K. may be able to
provide transportation and financing on a onestop “ship today, get paid today” basis. They
provide control and delivery of the goods
along with factoring or credit insurance.
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Overview:
ABL and other forms of international finance
Multijurisdictional
financing
Knitting together a comprehensive cross
border financing solution that leverages
all available assets.
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Purchase Order Finance?
• Purchase Order Finance is short
term transaction- based
financing that allows companies to
purchase or manufacture goods
that have been presold to their
credit worthy end customers.
• Equity alternative enabling
companies to achieve sales and
profits otherwise not attainable
without diluting existing ownership
or losing operational control.
• Bridge financing that works
alongside a company’s existing
financing facility (asset-based
lender, factor, or traditional line of
credit)
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How does it work?
• Tool that allows companies to finance large
orders that they otherwise couldn’t afford to
fulfill on their own due to lack of working
capital, supplier credit or availability with a
bank or receivable finance company.
• In a typical purchase order finance solution,
the purchase order finance company
purchases the inventory on behalf of the
company using letters of credit, cash, other
forms of credit enhancement
• This ensures that the supplier will release the
required inventory and allows the company to
fulfill sales orders
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Where does Purchase Order Financing Fit?
• Delivers programs needed to finance the
production of inventory
• Provides an equity alternative that enables
increased sales opportunities
• Supplies in-depth operational expertise to help
achieve a smooth transaction
• Gives businesses a short-term solution to fund
the inventory required to complete sales
transactions
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Purchase Order Financing is used to support:
• Sales growth that is outpacing working
capital
• Seasonal sales spikes that are straining
cash flow
• Inability to obtain an over-advance
from current lender
• Suppliers demand an assurance of
payment prior to manufacturing goods.
This is especially the case with
overseas suppliers
• Cash flow gap that exists between
payment to the supplier and
repayment from the end customer.
Suppliers require payment before
production starts or prior to shipment
whereas end customers demand
payment terms once goods have been
delivered.
• Turnaround mode or fast growing
start-up
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Candidates for Purchase Order Financing?
• Importers/Exporters
• Distributors/wholesalers
• Manufacturers
• Must provide tangible goods
as opposed to a service
Examples of companies recently
assisted by King Trade Capital:
• Apparel distributor
• Housewares importer and distributor
• Toys/games distributor
• Furniture importer and distributor
• Vehicle exporter
• Foods manufacturer
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Identifying a Purchase Order Opportunity
• Client must have purchase orders/contracts in
hand from a credit worthy end customer.
• Purchase orders/contracts must be firm orders.
No consignment or guaranteed sales.
• Gross profit in the transaction of at least 20%.
• Time frame of no longer than 120 days.
• Client either produces goods themselves or has
a third party supplier providing a finished good.
• Client’s supplier won’t ship unless payment is
received or acceptable payment arrangements
are in place (i.e., letter of credit).
• Client has the ability to perform.
• Client needs to move fast.
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Multi jurisdictional financing
• Complex Corporate Structure
• International Sales Growth
• Sales and Collections in Foreign Currencies
• Foreign Credit Risks
• Increased Liquidity Needs
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Solutions Offered by a multijurisdictional
Lender
• Resources to Structure Complex Deals
• Experience with International Markets
• Expertise in Foreign Exchange
• Understanding of Foreign Credit
• Ability to Support Capital Needs
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Important things to think about:
• Find an Experienced Partner
• Create an Inter-Creditor Agreement with an
Experienced Partner
• Set expectations and define individual
responsibilities
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What makes a partnership successful?
• Maintain Open and Frequent Dialogue
• Support Your Partner
• Support the Client’s Growth
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Speaker Contact Information
ANR Partners, LLC
Richard Palmieri
Managing Director
415 Pine Street
Philadelphia, PA 19106
Tel:
917-863-9661
rpalmieri@anrpartnersinc.com
www.anrpartnersinc.com
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Speaker Contact Information
Edward P. King
5944 Luther Lane, Suite 300
Dallas, TX 75225
Tel: 214-368-5100
Fax: 214-368-5105
www.kingtradecapital.com
Speaker Contact Information
Sami Altaher
Executive Director
15 Berkeley Street
Fifth Floor
London W1J 8DY
Tel: +44.020.7016.7724
http://www.fgifinance.com/
23
Thank
You
24
Purchase Order & Trade Finance
Presentation
Edward P. King
Founder and Managing Partner
Goals for Discussion
• Define Purchase Order Financing
• How does Purchase Order Financing work and where
does it fit?
• How King Trade Capital is different from a bank
• How King Trade Capital is different from a factor
• Identify the benefits of purchase order finance to
clients and A/R lenders
• What to look for in identifying a purchase order
finance opportunity and initial questions to ask
• Who is King Trade Capital?
• How King Trade Capital works with A/R lenders
• Examples of transactions
What is Purchase
Order Finance?
• Purchase Order Finance is short term
transaction- based financing that
allows companies to purchase or
manufacture goods that have been
presold to their credit worthy end
customers.
• Equity alternative enabling companies
to achieve sales and profits otherwise
not attainable without diluting existing
ownership or losing operational control.
• Bridge financing that works alongside a
company’s existing financing facility
(asset-based lender, factor, or
traditional line of credit)
How does it work?
• Tool that allows companies to finance large orders that they
otherwise couldn’t afford to fulfill on their own due to lack of
working capital, supplier credit or availability with a bank or
receivable finance company.
• In a typical purchase order finance solution, the purchase order
finance company purchases the inventory on behalf of the
company using letters of credit, cash, other forms of credit
enhancement
• This ensures that the supplier will release the required
inventory and allows the company to fulfill sales orders
Where does Purchase Order
Financing Fit?
• Delivers programs needed to finance the
production of inventory
• Provides an equity alternative that enables
increased sales opportunities
• Supplies in-depth operational expertise to
help achieve a smooth transaction
• Gives businesses a short-term solution to
fund the inventory required to complete sales
transactions
How Is King Trade Different From a
Traditional Bank?
• A bank lends money based on a client’s balance
sheet and income statement—financial ratios,
net worth, etc., as well as cash collateral,
certificates of deposit, and real estate. King
Trade Capital bases its funding not solely on the
income statement and balance sheet, but rather
on the client’s ability to perform and the credit
worthiness of the client’s end customers.
How Is King Trade Different From a
Traditional Bank?
• A bank is capped as to the amount it will be willing
to loan to a client determined by the client’s balance
sheet and income statement. The amount of
funding that King Trade Capital provides is
dependent on the size of the purchase order from
the end customer and the client’s abilities to
perform. King Trade Capital provides financing for
up to 100 percent of the cost of goods related to a
specific purchase order.
• King Trade Capital is a privately held investment
company that is able to react quickly and move
faster than banks and other traditional lenders.
How Is King Trade Capital Different
From a Factor?
• A factor advances on valid accounts receivable
once the product has already been delivered
and accepted by the end customer. King Trade
Capital bridges the cash flow gap between the
supplier and the end customer. King Trade
Capital will secure payment to the supplier prior
to the goods being produced and shipped.
Additionally, King Trade Capital will also
consider funding direct labor, freight and other
logistical needs of fulfilling a purchase order.
PO finance vs. traditional inventory lending
PO Finance
Traditional Inventory Lending
Definite sales transactions at a known time and
amount – seasonal or incremental
Potential sales volume at an unknown time and
amount – based on projections
Advance up to 100% of the cost of inventory –
may advance for overhead and labor in certain
situations
Advances 40 – 50% of the cost of inventory –
advance against labor and other operations
Monitoring is intensive and transactional in
nature
Monitoring is passive and relationship driven
Quick turning transactions of 30 – 90 days
Differs by industry but inventory many be onhand for a longer period of time
33
Purchase Order Financing is
used to support:
• Sales growth that is outpacing working
capital
• Seasonal sales spikes that are straining
cash flow
• Inability to obtain an over-advance from
current lender
• Suppliers demand an assurance of payment
prior to manufacturing goods. This is
especially the case with overseas suppliers
• Cash flow gap that exists between payment
to the supplier and repayment from the end
customer. Suppliers require payment before
production starts or prior to shipment
whereas end customers demand payment
terms once goods have been delivered.
• Turnaround mode or fast growing start-up
Who is a good candidate for
Purchase Order Financing?
• Importers/Exporters
• Distributors/wholesalers
• Manufacturers
• Must provide tangible goods as opposed
to a service
Examples of companies recently assisted by
King Trade Capital:
• Apparel distributor
• Housewares importer and distributor
• Toys/games distributor
• Furniture importer and distributor
• Vehicle exporter
• Foods manufacturer
•
Benefits of Purchase Order
Finance to Client
In order to fully understand the benefits of purchase
order finance, we need to first set the stage for the
common dilemma. First, the client receives a large order
from its credit worthy end customer(s) and/or the client’s
sales are seasonal and deliveries are concentrated in a
defined period of time.
The dilemma
1. The client is a start-up.
2. The client is cash strapped due to:
A. Start-up nature.
B. Balance sheet doesn’t support additional
borrowings from its senior lender.
Benefits to Client Continued
Dilemma continued…
C. Past bumps in the road such as:
I. A/R dilution.
II. Loss of a large customer.
III. Reorganization/new ownership.
IV. Bad operating results.
D. Lender fatigue.
E. Bankruptcy.
F. No down payment from end customer.
G. No credit terms from supplier.
H. Mismatched cash flow-supplier needs to be paid
immediately; however, end customer demands payment
terms.
Benefits to Client Continued
• The solution — Purchase Order Finance.
• Benefits:
1. Fulfill deliveries on time.
2. Continue to grow unencumbered by lack of
working capital and/or credit with suppliers.
3. Replacement of equity. Purchase order finance
provides.
working capital where banks cannot. An equity
placement would give away permanent ownership.
4. Build the balance sheet.
5. Structure safe transactions, especially with overseas
suppliers.
6. Keep clients’ suppliers and end customers apart.
Benefits to A/R Lenders
• Help keep an existing client and help that existing client
continue to grow.
• Help win a new client.
• Reduce the need to be forced into an “over advance” situation
where reserve and/or desire is not there.
• Purchase order finance provides a structure to ensure
successful deliveries and quality A/R through:
1. Due Diligence - verifications with buyers and accounts
payable.
2. Structure funding to ensure timely delivery.
3. Schedule third party inspections of goods prior to shipment.
• Create additional A/R to help a struggling client grow or get a
client out of an “over advance” situation.
How to Identify a Purchase Order
Opportunity
• Client must have purchase orders/contracts in hand from a
credit worthy end customer.
• Purchase orders/contracts must be firm orders. No
consignment or guaranteed sales.
• Gross profit in the transaction of at least 20%.
• Time frame of no longer than 120 days.
• Client either produces goods themselves or has a third party
supplier providing a finished good.
• Client’s supplier won’t ship unless payment is received or
acceptable payment arrangements are in place (i.e., letter of
credit).
• Client has the ability to perform.
• Client needs to move fast.
Initial Purchase Order Questions
• Copy of the purchase orders in hand that the client needs
financing help to fulfill.
• Complete cost breakdown in order to fulfill those orders
including freight and duties if needed.
• Complete supplier list in order to fulfill the purchase orders in
hand.
• Cash flow time line showing when financing is needed to
purchase finished goods/raw materials, pay for freight, labor
needs, etc. in relation to production lead times, shipping and
invoicing.
• General information on the client including year end and year to
date financials, ownership breakdown, management bios and
product information.
Who Is King Trade Capital
• We are a purchase order and trade finance
company offering the broadest-based purchase
order finance solutions in the country.
• We have been in business for over 19 years with
offices in Dallas and New York.
• We are a well-capitalized private
investment/finance company.
• We are not a bank; therefore, we are not hindered
by the regulations that restrict banks.
What King Trade Capital Does
• Provide purchase order finance to importers,
exporters and manufacturers of up to 100% of the
cost of goods (<80% of total sales).
• Provide letters of credit to domestic or overseas
suppliers for cost of goods.
• Provide cash funding to secure payment for raw
material, freight, duties and transaction-specific labor.
• Minimum transaction size of $300,000.00 depending
on the opportunity
• Maximum funding size of $20 million
What King Trade Capital Doesn’t Do
• Provide inventory financing where goods are not pre-sold.
• Finance transactions with <20% margins unless the
transaction is a quick-turn deal.
• Construction transactions.
• Service-only transactions.
• Acquisition financing (need to buy equipment or a factory
in order to fulfill purchase orders).
• Carry accounts receivable - We need an A/R lender in
place to take our financing out.
What role does the existing bank or
factor play?
• After the product is shipped and received by the
end customer, the company will invoice and
submit that invoice to their bank or factor.
• The existing lender will purchase or lend against
the resulting invoice generated from the King
Trade Capital financing.
• Available proceeds related to those invoices are
remitted to King Trade Capital to repay what is
owed and the balance is remitted to the
company.
How King Trade Capital Works With
A/R Lenders
Logistically
• King Trade Capital , client and A/R lender enter into
an “inter-creditor agreement” prior to funding that
instructs A/R lender that payments of all available
proceeds related to King Trade Capital financed
goods are to be remitted to King Trade Capital .
• Once goods have been shipped to end customer(s),
the resulting invoice is sent to the A/R lender to be
advanced.
• All payments from A/R lender are to be remitted to
KTC first, until KTC is paid in full.
How King Trade Capital Works With
A/R Lenders Continued
Legally.
• King Trade Capital files a UCC-1 to perfect its
security interest in the inventory and accounts
receivable of client.
• “Intercreditor agreement” specifically spells out
KTC’s and A/R lender’s security interests,
respectively.
• Once KTC is paid in full on an invoice-by-invoice
basis from A/R lender, KTC shall subordinate its
interest in those accounts receivable and inventory
related to KTC funding to A/R lender.
Importer Dilemma
•KTC was approached by a well-known importer of bed
sheets and pillow cases. The client’s existing lender
had termed out a portion of their revolving line due to
slower sales and covenant violations. The importer
had received large seasonal purchase orders from its
long-time credit worthy customer; however, it did not
have the availability to issue letters of credit to its
overseas supplier. KTC was able to assess the
company’s ability to perform, the credit worthiness of
the end customer and the specific shipping logistics
surrounding the delivery.
Importer Dilemma Continued…
• Within a week, KTC was able to issue a letter of credit
acceptable to the overseas supplier, as well as set up
a repayment agreement with the existing secured
lender.
• Goods were produced, inspected by a reputable third
party before shipment, and delivered on time to meet
the demands of the end customer.
• KTC was taken out of the transaction through an
advance on the resulting invoice from the existing
lender. The remaining proceeds were used to pay
down existing debt, as well as for general working
capital for the client.
Domestic Transaction
• A Factor contacted King Trade Capital with a
prospective client shipping advertising mailers to
individuals in certain Hispanic communities. The
client had contracts totaling approximately $950K
with credit worthy end customers. The client had
terms with the print shop responsible for printing
the envelopes and staging them for mailing,
however needed postage paid to the postal
service before the mailers could be sent. The
client had all of the necessary ingredients in
place for a successful transaction. However,
without prepaid postage, the program would not
be able to be completed.
Domestic Transaction Solved
• King Trade Capital was able to assess the
transaction’s viability and confirm the contracts with
the end customers. The factor approved the
individual credits and worked with King Trade Capital
to put an inter-creditor agreement in place.
• King Trade Capital funded the postage costs to the
print shop which allowed all mailers to be sent out
according to the terms of the contracts.
• The factor advanced on the resulting invoices and
remitted payment to KTC, thereby paying KTC in full.
• The client was able to satisfy first-time orders with its
important end customers.
ANR Partners LLC
Private Equity, Turnaround and Crisis Management Consulting
Overview
May 10, 2013
ANR Partners
ANR Partners LLC is a private equity, turnaround and crisis
management consulting firm. Our approach is highly focused on
partnering with our clients to help them achieve success. Our
experience allows us to quickly understand issues and deliver
results. We seek to improve the efficiency of our client’s
business as well as make the process of change as seamless as
possible.
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ANR Partners
 Our services are focused on Financial and Business Services
sectors.
 We offer the superior business knowledge derived from hands-on
experience as successful senior executives, at successful
companies involved in all types of financing and services.
 We understand the specific characteristics of the industries we
serve, and as a result are able to provide insight into the particular
challenges of companies in these sectors.
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ANR Partners - Practice Areas
Consulting
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Market Entry
Business Expansion
Vendor & Captive
Programs
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Program
Solutions &
Design
Organization Design
Change Management
Culture change survey and
solution design
Management Assessment
Human
Capital
Development
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Strategy
Benchmarking
Market Entry
Operations – Credit
Risk Management
Systems
Interim
Management
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Business
Process
Improvement
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Interim CEO
Advisor to
Management
Shareholder Advocate
Best Practices
Lower costs to Serve
Technology selection &
integration
Sector Focus
Financial Services:
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Asset Based Lending
Equipment Leasing
Factoring
Franchise Finance
Inventory Finance/Floor Planning
Logistics/Supply Chain Finance
Insurance Premium Finance
Business Services:
– Freight Payment
– Billing & Collection Services
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Client Profile
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Underperforming Business Unit, Division or Subsidiary of:
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Insurance Carriers
Brokerage Firms
Community and Regional Banks
Entrepreneurial Finance Companies
Investors in the Specialty Finance field
Commercial Finance and Leasing Companies
Captive Finance Companies
 Companies seeking to further penetrate or expand into new
markets / services.
 Companies positioning a business unit for sale/consolidation.
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Engagements
Our projects are highly customized and the specific scopes vary widely,
but we find that engagements fall into one or more of the following
categories:
 Strategy Alignment & Repositioning:
Evaluate the company strategy relative to the markets it
competes in and develop plans to better align or reposition
the company to more successfully achieve its mission.
 Business Process Review & Improvement:
Analyze the company’s existing business processes to
determine whether the current approach to service
delivery is achieving the desired level of customer
satisfaction and suggest alternatives to improve service
delivery through revised workflow/technology.
 Change Management & Organization Redesign:
Comprehensive enterprise review to identify needed
changes to organizational staffing, training, skill sets, and
structure to better deliver on the company’s
strategy/mission.
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Companies/Assignments
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Companies:
Assignments:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Canon Financial Services, Inc.
Citibank N.A.
Citicorp Industrial Credit
JP Morgan Chase & Co.
Commercial Credit Corp.
Credit Suisse First Boston
CSFB Logistics, LLC
Deutsche Financial Services
Deutsche Morgan Grenfell
GE Capital
PacifiCorp Credit
Schneider Financial Services
Schneider Payment Services
Whirlpool Financial Corp.
•
•
•
•
•
•
President & CEO of $1.4 Billion
Captive Vendor Leasing company
Chairman of a Technology
Outsourcing Company
CFO of a $1 Billion National Office
Equipment Sales company
President & CEO of an $8 Billion
Transportation Services company
President & COO of a $2.3 Billion
Diversified Captive Financial Services
company
Managing Director of Transportation
and Logistics Investment Banking
Chairman of a London based Aviation
Merchant Bank and Financial Service
companies in Spain, Canada and the
UK
Managing Director Profile
Richard P. Palmieri, Managing Director has a track record of
visionary leadership and dynamic management and the practical
implementation skills necessary to drive rapid, effective and lasting
change. Richard has served in a variety of roles: Chairman, CEO,
President, COO and CFO. He employs a strong analytical and
operational approach to business issues. Richard developed his expertise
over the last thirty years working in a wide variety of industries, including
financial services, investment banking, consumer products, transportation
services, manufacturing and technology. Prior to ANR Partners, he was
President and CEO of Canon Financial Services, a subsidiary of Canon
USA. His experience includes turnaround and crisis management,
mergers, post-acquisition integration, asset sales, syndication, consumer
& commercial finance, leasing, business assessment and strategic
repositioning.
Mr. Palmieri is a past Chairman of the Commercial Finance Association, a
member of the Turnaround Management Association, a member of the
Association for Corporate Growth and a member of the Experts Advisory
Panel of the United Nations Commission on International Trade Law
60
Thank You
Richard Palmieri
Managing Director
rpalmieri@anrpartnersinc.com
917-863-9661
www.anrpartnersinc.com
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CANON FINANCIAL SERVICES
CONFIDENTIAL | October 2007