Who Is a Candidate for Transactional Financing?

This unique financing is most suitable for the thousands of fast growing importers, wholesalers, assemblers, and manufacturers engaged in the outsourcing of product lines both domestically and overseas, a growing trend. Users of this type of financing are diverse, and are found in a variety of industries, from consumer goods to high-end technology. The Internet, advances in technology, instantaneous communication, ease of travel, and trade agreements have produced a world economy, which requires the services of transaction financing sources.

Candidates for transaction capital often fall into two categories. The first is the too successful company, undercapitalized and overtrading on its equity. The second is the company whose performance has been adversely affected by seemingly sound operating decisions, which did not properly anticipate changes in market conditions and has suffered losses. In either case, there are generally two avenues available to accommodate the working capital requirements of these companies and purchase order financing has a place in each.

The equity route may ultimately be the answer for the successful company, but because of shareholder dilution considerations or the prevailing market atmosphere, the timing may not be right. In this case, alternative lending could be a viable alternative to equity by bridging the gap between primary debt and the public market. For the start up situation, a smaller company or a business whose performance does not justify entry to the equity markets, the most practical solution is additional debt, provided by the traditional lending facilities of a bank, or asset bank lender. In the event conventional financing cannot provide all of the required financing, additional funds can be found through the cooperation of a bank and a transaction finance company.

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