A large food processor contacted AeroFund Financial interested in signing up for our latest service the AeroPay Express Virtual Credit Card. They wanted to pay vendors, get extended terms and have greater buying power. In analyzing the company for a $200,000 credit line, the AeroPay staff found that things were more dire than the company lead them to believe. There were several judgements, a few tax liens, they were past due on payroll taxes and they were seriously behind with vendors. To top it off, they had an overdue credit line with a local bank and in violation of bank covenants. To issue an AeroPay Express credit line the credit of the applicant must be excellent. This is an unsecured credit line so cash flow and history of paying company bills is of the upmost importance.
It has been sixty years since Diners Club and American Express issued the first credit cards. It wasn’t until 1958 that Bank of America issued the Bank Americard that credit cards became accepted by the public and merchants alike. The success of the Bank Americard propelled American Express to new heights and forced several California banks in 1966 to collaborate to create their own card called Master Charge. This newest card eventually changed its name to MasterCard. This new competition forced Bank of America to put together their own member banks and rebranded as Visa.
PACA. Those four letters are enough to turn a lender’s face red. What is PACA? It’s the Perishable Agriculture Commodities Act. PACA was enacted by congress in 1930 to protect the rights of farmers and the wholesalers who ship and sell fresh produce. In simple terms, PACA protects and ensures growers and wholesalers will get paid by establishing a trust on every sale.
If you are in the lending business, you will find that the field has gotten very crowded over the last decade. With interest rates low and the stock market high, investors have been looking in vain for new places to put their money to get higher yields. Couple that with the new crop of FinTech’s offering loans over the internet and it’s no wonder why there is heated competition among lenders looking for borrowers to take their money.
There is an old saying that “everything old is new again” That is as true in finance as it is in fashion. Businesses are always looking for a competitive advantage so they are quick to move strategies when a market gets crowded. They have gone from the trend of just-in-time inventory, to extended payment terms from vendors, to finance that inventory, to shipping straight from the manufacturer. They will use anything to cut capital outlay and improve cash flow. Fifty years ago sellers looked more at margin than cash flow and would ask for discounts to cover the cost of holding inventory. Fifty years ago it was common to see terms of sale at 2/10 net 30.
While no one was looking, the largest corporations in the world have being changing the way they pay their accounts payables. Since the explosion of the business credit card, major players MasterCard, Visa and American Express have been salivating over the opportunity to issue branded credit cards to major corporations. American Express developed Open, while Visa and MasterCard worked with banks to offer procurement cards to the fortune 500 companies. These major players had a pretty clear road to domination; that is until some very clever young men in Silicon Valley created the virtual world of FinTech.
PACA the Perishable Agricultural Commodities Act was established in 1930. The act was established to protect growers when they sold their goods off the farms. Before PACA there was much abuse and unfair trading practices when dealing with farmers. PACA was established to end these abuses and assure that farmers and their brokers get paid promptly. Farmers, brokers and distributers can all register with PACA and get all the protections it affords. The requirements are simple:
We all know of the names Ford, Chevy, Chrysler, Buick and Dodge when it
comes to the automotive world, but have you ever heard of Fisher?
Supply chain financing with AeroPay Express