Alternative Ways to Raise Funds for the Company’s Marketing Budget

In recent years, the 3D printing business has seen a tremendous growth. As a manufacturer/supplier of industrial and consumer products in this sector, the company is set to take advantage of the booming demand in the industry. Apparently, that cannot be done by only boosting our production as there have been many new entrants into our line of business who pose stiff competition in the market. As such, it has become more increasingly necessary for the company to invest more in its marketing campaigns. With the company’s funds strained from current expenditure and unwilling to take up more loans, it is essential that it explores other alternative means of funding.

Action Line:

When faced with financial constraints most companies mostly run for bank loans. However, in an occasion the company’s shareholders are unwilling to rely on bank loans for one reason or the other, they cut their expenditure which in most cases involves laying off certain employees.

However, for manufacturing companies, there exist many ways of raising funds besides the conventional bank loans. Some of these alternative methods of raising capital help avoid the risks and bureaucracies involved in bank loans. Their convenience nature would allow a small manufacturing company to raise money by taking up bigger purchase orders than the company’s current financial capabilities while still meeting its other financial obligations. 

The Rest of the Memo:

As a small company in the manufacturing industry, purchase order financing would be one of the best ways to raise more revenues to help in our marketing. In this case, once the firm gets orders from the customers, instead of using the company’s capital in the overall production of the ordered goods, the firm can turn to organizations that offer purchase order financing. In turn, we can channel the finances that could have been used to execute the order, to our marketing campaigns to help seek more similar clients. Doing that repeatedly, the company’s cash flow will remain uninterrupted while still registering growth.

Commonly referred to as PO funding the purchase order financing scheme will also give the company ability to avail goods to the clients faster using money from other sources before the invoice is generated. Furthermore, the company will be able to take more orders from clients without extending its borrowing.

The most interesting thing about PO funding is the fact that unlike bank loans it will involve the lender providing finances for our company to do all the manufacturing and delivery to the client. Once the invoice is due, the PO funding company will collect the money from the client, on our behalf and after deducting their commission, the remaining amount is paid to our company. In such an arrangement, the company will be able to take lesser risks in part of manufacturing and sales of our products. With PO funding, the company will take up even bigger orders than before and help in the expansion.

Furthermore, with such financing that has short-term and well-defined obligations, the company can plan for a period of manufacturing while using PO funding money and at the same time investing the extra revenues into infrastructure and other investment. After a certain set period, the company will have accumulated more capital to be self-sufficient and can run without help from bank loans or purchase order financing.

Also, it is worth noting that not all companies qualify for purchase order funding. It is mostly available for companies that deal in manufactured goods and making a margin of at least 20% on the sale. Luckily enough, our company meets that threshold. Other advantages of settling for PO funding are, it is easier to qualify as compared to bank loans and does not need a business to have stellar credit.

To ensure this strategic plan is a success, the company will begin by conducting thorough due diligence on various PO funding companies before selecting two of them. After that, the firm will set up a meeting with a proposal for a long-term arrangement where we can promise to make many of such transactions with the company, in exchange for discounted commission rates.  The main objective here will be to strike a strategic alliance with a competent financier who can guarantee financial assistance for as many purchase orders as we can manage. That will be essential as we will be settling for PO funding for only a set period of time when we hope to execute many orders than our usual budget. The revenues will be used to grow our assets and client base.

Additionally, it is essential to combine the PO funding strategy with the use of Factor Invoice as a means of raising funds. Especially with the pressure from our shareholders to receive their dividends in time and uninterrupted, factoring invoice is another alternative means of raising such money and keep the company running. In this particular case, as long as the company maintains its clients, it will be able to take up the funds allocated for dividends, direct it to our manufacturing or marketing efforts and attract more clients.

In case the deadline for the payment of dividends is close and our clients have not yet paid, we can find a factor to assign the invoice over to that is all that invoice factoring does. The company will receive the full amount of the factored invoice immediately, with less factor’s fee. Please note that although the interest rates in invoice factoring are generally higher, ranging from 10% of the invoice amount, it would be a very reliable means of raising quick funds to maintain the normal operations of the company. Furthermore, factor invoice offers credit insurance for our transaction as once they give us the payment, they assume 100% risks in case the specific client fails to pay.

With a combination of these two types of funding, I believe we can steer the company towards endless growth while at the same time meeting our internal and other eternal financial obligations efficiently.

The following readings offer more information about the alternative funding

Duffy, Marko. "Don't Fear The Purchase Order." Metal Finishing 111.4 (2013): 33. Web.

Huang, Boray, Andy Wu, and David Chiang. "Supporting Small Suppliers through Buyer-Backed Purchase

Order Financing." International Journal of Production Research (2018): 1-24. Web.