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It’s a classic “too much of
a good thing” scenario: An
emerging outdoor company
makes killer products, grows
a devoted fan base and starts
gaining space on retailers’
shelves. Then comes “The Or-
der” – a commitment from a
retailer willing to purchase a
significant amount of new prod-
uct. Suddenly, the emerging
outdoor company has to figure
out how to pay the short-term
costs of producing and deliver-
ing “The Order”.
Small-to-mid-sized manu-
facturers often struggle with
finding money to keep the
company growing in that pe-
riod between closing a pre-
season order and delivering
the products to the retailer.
Many companies in that po-
sition simply sell off their
hard-earned equity – a quick
fix that delivers an infusion
of cash but often comes with
long-term drawbacks and loss
of entrepreneurial control.
Other companies, such as
Utah-based Saga Outerwear,
have turned to more creative
types of short-term financing –
in particular, a program called
“purchase order funding.”
Popular in other markets
and industries, purchase order
funding is an emerging trend in
the outdoor market. At its basic
level, PO funding is an advance
of money paid to a company’s
supplier so the company can
fulfill a customer’s order. It
doesn’t involve a bank loan
or surrendering ownership,
and the average loan period is
about two months.
“We were selling direct-to-
consumer only, but there was
a demand for our product at
the wholesale and retail level,”
said Andy Mallett, CEO and
co-founder of Saga Outerwear.
“We were at a point that we
simply couldn’t finance our
growth on our own. We could
get a smaller line of credit from
a bank, but that wasn’t enough
to produce our goods in Asia,
ship them to our wholesalers
and retailers and then wait
for payment after delivery. We
needed to find a way to gener-
ate revenue.”
Saga teamed up with Cal-
ifornia-based Gateway Trade
Funding, one of the leading
purchase order financing com-
panies operating in the out-
door industry.
“We were introduced to
Gateway by a conventional
bank that turned us down,”
said Mallett. “It worked out
well. Gateway allowed my part-
ner and I to maintain owner-
ship in our company through
a high-growth phase. Yes, debt
financing can be expensive, but
it’s a lot cheaper than selling
your equity.”
Ned Post is Gateway’s Busi-
ness Development Manager
for Outdoor Markets. He came
to the financing company after
more than 20 years as the presi-
dent of Smith Optics and under-
stands outdoor buyers, outdoor
consumers and the pace of over-
seas production of goods.
“The outdoor market is
the perfect place for purchase
order funding,” said Post, who
“Yes, debt
financing can
be expensive,
but it’s a lot
cheaper than
selling your
equity.”
by
Chris
Kuroda
Alternate Advance
Purchase order funding helps build a bridge to growth
Back
Office
Inside
Outdoor
|
Summer
2016
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