New York-based Zenith Insured Credit is reaching out to furniture, mattress and bedding manufacturers and suppliers to introduce its innovative supply purchase credit programs. The program’s debt-free supply purchase financing structure is specifically geared to provide off balance sheet credit to manufacturing businesses that need to place large or time-sensitive raw materials and components.
For bedding manufacturers with growing businesses and seasonal sales increases, the program solves a number of the pain points associated with company expansion and inconsistent demand. Bedding manufacturers need to buy materials, but also need to avoid debt. In some cases, manufacturers with existing debt may not be eligible to borrow any more money or extend the supplier’s line of credit. Additionally, they may not be able to provide the 20-30% normally needed if they choose a purchase order finance arrangement. Zenith pays 100% for these raw materials.
For example, this credit option could support the purchase of polyurethane or latex foam for mattresses and pillows. This typical situation would involve a bedding manufacturer needing to purchase supplies to fulfill a retailer’s purchase order. Zenith would pay for raw materials and invoice the manufacturer with a mark-up based on mutually agreeable terms. This type of financing transaction is structured as a “cost of goods sold” and is not considered a debt on the manufacturer’s balance sheet. It has no effect on current or future bank debt. The common alternative for the manufacturer is conventional purchase order financing. However, under these terms the manufacturer would need to front 20-30% of the overall purchase of materials and supplies, and the payment received on the invoice to the retailer must be paid to the lender.
Zenith’s supply purchase financing does not track the specific purchase order or invoice. Repayment relies on the cash flow of the manufacturing company. Again, the program treats the purchase of vital supplies as a “cost of goods sold” for the manufacturer and not as debt. According to Zenith spokesperson Cole Reifler, “Our clients do not need a great balance sheet, but they do need to demonstrate that they pay their bills on time, and that they have the cash flow to pay us back. Zenith prefers clients who need supplies over a relatively short period of time totaling $500,000 or more.”
Since the Zenith purchase covers 100% of the suppliers’ invoice to the manufacturer, it often gives the manufacturer optimal bulk pricing advantages. While a manufacturer can go to a bank, they may not qualify for a loan. If they do qualify for a loan, they may face restrictions and long wait times. Zenith relies on terms driven by due diligence and the manufacturer’s general business conditions and cash flow making its program much more convenient for funding urgent orders.
Zenith has demonstrated its uniqueness and creativity in the supply purchase business; and as a result, has attracted significant capital to deploy for supply purchase financing.