What Is Port To Port Finance And How Does It Work?
|What exactly is a port to port finance? |
Port to port finance is where we finance goods from one port, bring them overseas, to another port, which is usually within Australia. It doesn’t have to be within Australia, but what does have to be Australian is our client.
|How is a port to port finance different from purchase order finance?|
There’s a couple of major differences. The first major difference is there’s no need to pre-sell the goods, although that is advised. But you don’t have to have a purchase order from your end customers.
The second thing is that it is usually used for commodity-like types of products or products that have high intrinsic values, such as forklifts or capital equipment. Some things that it’s not, things that couldn’t easily be resold to other things, such as high fashion goods.
The other difference with a port to port finance compared to purchase order finance is that there’s no requirement for factoring. So you don’t have to be dealing with your end customer on credit terms.
|Let’s have a little look now about how the logistics of it work. |
The client or yourself give us a small deposit for the goods. We take that deposit and use it as a form of collateral. We give a letter of credit to the manufacturer overseas, usually for the full amount of the purchase price.
Once the goods are made, they are then shipped through to the port. We clear them through customs. Once they are cleared through customs, we hold the goods until we’re paid by either yourself or the customer.
In certain circumstances, we’ll let the goods go, and that’s where you’ve got credit-worthy customers or in the case of capital equipment, where the customer has an equipment finance facility in place. In that situation, we would just direct the finance company to pay us out upon commissioning of the goods.
|If you’d like to know more please do not hesitate to reach us below|
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|AR Cash Flow is an expert in PO finance and production funding and it has been providing PO finance solutions to its clients since 2003.|