PACA - A Case Study

December 14, 2016 by Stephen K. Troy in with 0 Comments


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. The trust may ensure a wholesaler will be paid; it also prevents the wholesaler from getting the financing they need to grow their business. The trust extends all the way up the chain from the grower to the retailer. When you are financing a receivable of a produce wholesaler, you will never know when or if the goods where paid for, making it impossible for a lender to know when the trust is complete. This part of the act prevents most lenders from doing business with produce distributors. 

As complicated as this sounds, there is now a solution that can be used to finance wholesalecreditcard-ape.jpg produce companies. It’s the AeroPay Express Vendor Procurement Card. The AeroPay Card is similar to bank credit cards allowing the buyer to pay for those goods when they are shipped and accepted. 

Paying for goods early means that the vendor doesn’t have to carry a receivable which improves the cash flow of the wholesaler/vendor. 

This frees up the vendor's cash to pay their bills allowing expansion in their business. Paying for the goods eliminates the PACA trust, since the trust only applies to bills that haven’t been paid. This is what allows lenders to go back into the market and provide financing for the produce industry. The buyer gets a credit line and the seller gets their cash, solving the cash flow needs of both the buyer and seller simultaneously. 

Unsecured credit lines and early pay systems like AeroPay Express stand to transform the produce industry. When all vendors' goods are paid for when shipped, there will no longer be a need for a wholesaler to carry receivables. This pumps billions of dollars into an industry in need of cash flow. 


That’s just what happened with a produce wholesaler in California’s Central Valley. A $250,000 credit line enabled a small wholesaler the ability to buy avocados in larger quantities from Mexican suppliers. Knowing they had the backing of their AeroPay Express credit line and the ability to sell on terms to their customers, the wholesaler aggressively went out to market and was able to sell those avocados and turn inventory more quickly for a bigger profit. Buying from an international supplier poses additional problems for all industries, not just produce. International sellers are not inclined to provide terms to a buyer that is out of the country. AeroPay Express solves that problem by paying international sellers when they ship, then giving extended terms to the buyer. A win-win for both buyer and seller. 


If you are a vendor who is looking to free up cash, or a buyer wanting to expand either your credit lines or your business, AeroPay Express can design a program for you. 

What is Supply Chain Finance?



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