| According to Dictionary.com, the word easy has | | | | cash to fulfill the order. Purchase order financing |
| about 17 definitions. The most relevant definitions | | | | provided the solution to their cash flow shortage |
| are: | | | | to pay for the manufacture of the products and |
| "1. Not hard or difficult; 6. Not burdensome or | | | | get the goods shipped to the big box customer. |
| oppressive; 7. Not difficult to influence or | | | | How does it work? A letter of credit is issued to |
| overcome; 11. Not tight or constricting; 14. In | | | | the manufacturer to guarantee payment. The |
| commerce it means not difficult to obtain." As | | | | costs of goods are paid to the manufacturer as |
| used in this article, easy money is meant to | | | | soon as the goods are delivered, in the example |
| convey the idea that, notwithstanding these very | | | | above, to the big box store. An account |
| difficult times in 2008 where money is tight and | | | | receivable financing arrangement is created to pay |
| difficult to obtain, under certain circumstances a | | | | for the purchase order and letter of credit side of |
| business that sells products to other businesses | | | | the transaction. When the buyer pays the |
| can easily obtain money to grow exponentially. | | | | accounts receivable, the lender, generally a finance |
| On our planet earth, man did not invent money | | | | company or bank subsidiary, is paid pursuant to |
| for thousands of years. As civilizations and nation | | | | the contract and the profits are rebated to the |
| states developed, man learned how to trade and | | | | seller. |
| barter for goods that they needed. Money was | | | | Why is it easy money? Because the credit of the |
| invented to solve the problems of bartering. | | | | seller is not the main criteria to secure the |
| There basically was a timing issue between, for | | | | financing; the credit of the buyer is used to |
| instance, farmers having a crop to trade for what | | | | support the financing. Nevertheless, good |
| they wanted when they needed it. The invention | | | | character and experience are important to |
| and acceptance of gold and silver coins helped to | | | | lenders. During the due diligence process lenders |
| overcome this timing mismatch. The farmer could | | | | need to determine that no prior UCC-1 liens exist |
| sell crops for gold and trade gold, when needed, | | | | with respect to the company. If there are serious |
| for the other things they required. | | | | credit issues such as bankruptcy, the approval of |
| Paper money was invented for many reasons, | | | | a bankruptcy court for the debtor in possession |
| not the least of which is to avoid the | | | | would be required. These types of situations |
| inconvenience of carrying around a large amount | | | | would not typically be approved by a Bank, but |
| of gold or silver. Paper money is easier to hide. | | | | the financing is still relatively easy to obtain |
| Until the early 1900's in the United States paper | | | | considering the circumstances. And it is available if |
| money could actually be redeemed for gold. | | | | virtually unlimited amounts of capital. As the |
| During the Great Depression, President Roosevelt | | | | business grows so to will the finance facility grow |
| in 1933 passed laws outlawing the ownership of | | | | so long as the purchase orders are from solid, |
| more that $100 of gold by individuals. By the turn | | | | creditworthy entities. |
| of the century, the U.S. government discovered | | | | In 1959 Barry Gordy, the founder of Motown |
| easy money. No longer restricted by the need for | | | | Records, and Janie Bradford wrote a song called |
| physical gold reserves, the government printing | | | | "Money" (That's What I Want). The song was the |
| presses churned out however much money as | | | | first big hit for the record label. It was covered |
| they needed; and the politicians invented schemes | | | | by the Beatles in 1963. Everyone wants easy |
| such as the sale of government bonds, | | | | money. Here are the lyrics: |
| government loans of various kinds, and control of | | | | The best things in life are free |
| the money supply through twelve regional Federal | | | | But you can keep 'em for the birds and bees |
| Reserve Banks to manage the nation's economy | | | | Now give me money (that's what I want) |
| and money supply. | | | | That's what I want (that's what I want) |
| Our government's easy money in fact is causing | | | | That's what I want (that's what I want), yeah |
| every American a very steep price. As the world | | | | That's what I want |
| economy realizes our money has less worth, we | | | | Your lovin' gives me a thrill |
| are charged more for imports such as gas, | | | | But your lovin' don't pay my bills |
| clothes, and food; if we travel abroad, in Europe | | | | Now give me money (that's what I want) |
| for instance, we find that it takes about one and | | | | That's what I want (that's what I want) |
| a half U.S. dollars to purchase a single Euro, the | | | | That's what I want (that's what I want), yeah |
| currency of Europe. In effect, European hotels, | | | | That's what I want |
| restaurants, goods and services cost fifty percent | | | | Money don't get everything, it's true |
| more for Americans because of the weakness in | | | | What it don't get, I can't use |
| our dollar. Ironically, U.S. musicians make more | | | | Now give me money (that's what I want) |
| money in Europe than they can make in America | | | | That's what I want (that's what I want) |
| because it costs less to pay them "in dollars". In | | | | That's what I want (that's what I want), yeah |
| spite of this economic situation, many U.S. | | | | That's what I want |
| businesses are innovative, creative and ready to | | | | Well, now give me money (that's what I want) |
| grow at a very rapid pace. Purchase Order | | | | A lot of money (that's what I want) |
| Financing can be the easy money solution to rapid | | | | Whoa, yeah, you owe me money (that's what I |
| growth requirements. | | | | want) |
| Why does it work? Purchase order financing | | | | Oh, now give me money (that's what I want) |
| solves the timing problem to pay a manufacturer | | | | That's what I want (that's what I want), yeah |
| for goods before the buyer pays the seller for | | | | That's what I want. |
| the product just like paper money and gold solved | | | | The bottom line: Purchase Order Financing is easy |
| the barter timing mismatch problem. One real | | | | money compared to traditional bank financing. |
| world example is the case of a company that | | | | Similar to the government printing presses for |
| developed popular products for dogs and cats. | | | | paper money, purchase order financing combined |
| Most of their customers were small stores. One | | | | with accounts receivable financing, or factoring, |
| day they received a huge order from a big box | | | | can be a source of virtually unlimited cash for |
| store that would virtually double their business on | | | | your business. Is that what you want? |
| a monthly basis. The business did not have the | | | | |