Curious about purchase order financing in China? You’re in the right place. In this post, we’ll discuss the ins and outs of po finance in the Chinese market. We’ll answer questions like:
- How does purchase order financing in China work?
- How to apply for purchase order financing in China?
Purchase Order Financing: The Basics
Purchase Order Financing in China
Purchase order financing Chinese exports has always been a hot topic for US based importers. According to worldbank.org, China exported over $2.7 trillion dollars worth of goods in 2020. They are the largest exporter of product, and when doing business in China cash is king.
When a company has a large purchase order to fill from customers like:
they need to find a supplier who can handle the capacity to produce goods on time.
Mix in supply chain challenges, lack of working capital, and delays in shipping, and you have an up hill battle to fight.While some challenges are much bigger than any one solution, purchase order financing Chinese goods can easily be solved for.
Companies turn to PO Funding when they need access to working capital to acquire or produce goods to resell to their customers. In today’s volatile logistics market cash is king. Nobody can predict if and when supply chain and logistics delays will occur. In addition, new tax programs have also created a hardship for importers and exporters in certain industries. Having the right financial support from a firm experienced in purchase order financing Chinese products is crucial to your success.
In the following paragraphs we are going to discuss how and why global businesses are turning to purchase order financing Chinese goods more today than they ever were. From apparel to electronics, Chinese exports remain strong and the demand does not seem to be letting up any time soon. Let’s dig into how these businesses are financing the purchase of millions of pieces of product.
How Are Payments Made For Chinese Purchase Order Financing
The most common question we get asked about purchase order financing Chinese goods is, about how the payments are made. There are a few ways that purchase order financing works and we will walk you through them below. Here are the top payment methods used for purchase order financing Chinese goods:
- Letters of Credit – A lender will issue a letter of credit to your supplier to cover the costs of producing your product. This letter of credit is drawn from a top bank, and leverage is provided against your outstanding purchase orders.
- Cash Against Documents – In the event a supplier will produce goods without a cash deposit or LC, a lender can pay cash for goods after they have shipped. The lender is paying when they receive the shipping documents.
- Cash deposit for production – While most lenders won’t provide a cash deposit under a PO Financing transaction, there are ways around this. Sometimes it requires more than one financing program like the use of factoring accounts receivable.
Next, people want to know how much it costs to purchase order finance Chinese exports. There are general market rates that you should expect. When shopping for PO Funding you should find rates between 1.5-3% per 30 day period. The rates depend on a few main factors including:
- Size of the po funding transaction.
- Lead time and duration of funding from paying for goods to to being repaid by the customer.
- Who the end customer is and the credit worthiness of the end customer buying the goods.
- Method of financing used
I am sure you are wondering how to secure purchase order financing for Chinese goods. The process is surprisingly easy. As long as you are working with the right lender, getting support for your transactions should be fairly straight forward. Star Funding has been providing international trade finance solutions for over 20 years. Contact us today if you have any questions, or to get started with us.