Tuesday, June 28, 2005

The Deal I Won't Do!

Unfinished Goods Purchase Order Financing

Say What?

In a nutshell, this is when a manufacturer or importer has a purchase order from a client but must now manufacture or pay someone else to manufacture the goods, which are then used to fill the purchase order. They must then find a source to put of the cash to fill the order.

Having done one of these deals, (and thank God, well at least my God, we took a collateral mortgage over a primary residence) and seen it gone sour, I am in no hurry to accept this sort of risk again.

So why do these deals keep me up at night?

Something called completion risk............as in will my client actually complete the project on time, within specification and get it to the end customer on time. Worrying about a client making a shipping deadline is gut-wrenching enough (as in when we do Finished Goods Purchase Order Financing), taking it one step further when they have to manufacture it (and even another step further when a 3rd party does the manufacturing .......... like a factory in India or China) makes me think about getting a normal job, like either a window washer or explosives' expert.


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