Funding the purchase of finished goods is the most common form of Purchase Order Finance. Generally speaking, this transactional form of finance follows a set of procedures, which when followed, should lead to a Win/Win situation for the client and the financier. These procedures are:

1. The client obtains a confirmed purchase order from a credit approved customer. Most of the purchase orders call for open account terms, but occasionally the customer issues a letter of credit to the client to enhance the transaction.

2. The client places a purchase order with his manufacturer/supplier (foreign or domestic).

3. STAR evaluates the structure of the proposed transaction.

4. When satisfied with the transaction’s structure, STAR opens a letter of credit to the supplier.

5. Just before the goods are ready to be shipped, STAR will send in an independent 3rd party inspection company to make sure the products ready to be shipped are what was ordered in the right quantities, quality and in the right time frame.

6. Generally the manufacturer/supplier presents documents against the letter of credit through his bank.

7. Assuming the documents are in order, STAR will pay for the documents.

8. The products arrive, and STAR will pay the duty and freight, if requested to do so.

9. The products may be drop-shipped to the customer or shipped to a warehouse where they are unpacked and staged for shipment to the customer.

10. When the merchandise is shipped to the customers, the receivable is assigned to STAR. Ultimately, the customers will pay STAR, who will take what is owed to it and pass the balance of the funds to the client. Sometimes there is a senior lender or factor involved. In those cases, the senior lender or factor will make advances against the receivables direct to STAR sufficient to repay its advances and fees.

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