Monday, November 13, 2006

Wall Street Journal - Can You Afford to Say Yes?

Today's Wall Street Journal section on Small Business included a follow up story on PenAgain, which had achieved the small business holy grail of landing a big order from Walmart.

While a small business might typically be thrilled by such an event, the challenges that it presents correctly had the business owners acknowledging that they couldn't afford to say "no", yet they might not be able to afford to say "yes".

From a financing perspective, the cash flow of a small business can be overwhelmed by receiving significant orders from one big customer. In the short run, how does a small business fund the production costs of delivering the goods? PenAgain has seen big orders come in not only from Walmart, but from Office Depot and Walgreen. CVS, Staples, OfficeMax and Bed Bath & Beyond have all shown interest in their products as well.

So how did PenAgain obtain the funding needed to meet the explosive demand for its growing product line? PenAgain has lined up purchase order financing to finance an order upfront in return for a share of the profit in return.

And to pay off the purchase order financing, PenAgain may very well have lined up a factoring line of credit as well in order to borrow against the receivables to pay off the purchase order financing once the product succesfully ships.

This story is a perfect example of how a small business can obtain non-bank business loans to provide the working capital necessary to close big sales.

Need help finding the right lender to fund your explosive growth, read "Matchmaking for Business Loans" and then give me a call.

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