The apparel industry has many nuances, cash flow constraints being one of the most significant and challenging. Long delays between placing an order and having it delivered to the end customer, along with an extended period between delivery and payment and it can sometimes be a six-month cycle without any cash flowing into the business.
For the apparel business owner, maintaining consistent cash flow is an ongoing battle as the industry by its very nature is inventory-intensive and carrying a wide range of stock ‘just incase’ results in valuable capital being tied-up that could be utilized in other ways. Given the increasingly volatile and unpredictable trading conditions over the past couple of years, it’s become near impossible for apparel companies to forecast demand accurately; this typically sees them having to resort to markdowns to shift stock and then profitability takes a hit, further hampering cash flow.
We’re on the cusp of actually transitioning into some sense of normality, however, for the apparel industry, the road ahead is still very uncertain. Supply chain challenges, interest rate rises, labor shortage and shifting consumer behavior mean cash flow will remain the primary challenge for apparel businesses in 2022.
Lots of conventional lenders steer clear of funding apparel businesses because of the level of uncertainty in modern consumer demands and supply chain. Luckily, there is a lesser-known, specialized finance product that’s available for most apparel companies to take advantage of and it can provide the working capital needed to grow a business in this challenging sector.
What is Apparel Purchase Order Financing?
Apparel purchase order (PO) financing provides the up-front capital to get goods manufactured, delivered and paid in a timely fashion. The process is very straightforward – you choose a PO finance company, they pay your supplier so that they can manufacture and ship your goods and on delivery to the end customer, the customer or your debtor, typically remit payment to the financing company who then forwards the payment onto you minus their fee.
What are the Benefits of Apparel PO Funding?
The benefits of this form of financing are numerous…
What is Needed to Apply for Apparel Purchase Order Finance?
Although the finance company will check that there are no serious issues with the applicant’s business, they will be primarily concerned with the other parties to the transaction and their history. Essentially, the finance company gets paid by your customer and they will be looking for a creditworthy customer with a good financial track record and no major concerns with tax or litigation outstanding. The same can be said for the applicant’s supplier – they will also need to be reasonably well established and reputable so that they are sure to fulfill the order to the end customer.
At Sallyport, we will assess each application for PO finance on its own merits with a view to ensuring that the transaction will be profitable for all parties and ultimately support the applicant’s growing business.
Apparel Businesses Grow with PO Finance
Apparel businesses supported with Sallyport’s tailored PO financing solutions are doing more than just getting by, they’re thriving and able to ride out heavy periods of production and seasonal peaks, safe in the knowledge that the cash will not run out.
Never miss out on a growth opportunity again – reach out to our Apparel finance specialists today for the next steps in freeing up working capital through apparel purchase order finance.
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