Claygrove Capital Group turns the order into a request a funding partner can price.
Claygrove Capital Group, based in Van Buren, Arkansas, puts inventory and purchase order financing requests in front of funding partners. This page covers purchase order financing for contractors, how inventory financing works, choosing a company, an invented example and what the term means.
At a glance
- Plumbing, heating and air-conditioning contractors, Crawford County, AR
$11.1 million in annual payroll (CBP 2023)
- Automotive repair and maintenance, Crawford County, AR
30 employer establishments (CBP 2023)
- Machinery, equipment and supplies merchant wholesalers, Crawford County, AR
16 employer establishments (CBP 2023)
Purchase order financing for Crawford County, AR plumbing and HVAC contractors with large orders
When a business has already sold goods but cannot afford to buy them from its supplier up front, purchase order financing pays the supplier. A plumbing and HVAC contractor that wins a large order, for example the units and fixtures for a new commercial building, may have to pay the distributor before the customer pays anything.
Illustration only, invented figures: the contractor needs $64,000 of equipment for a signed job. A purchase order finance company pays the distributor directly and charges a fee of 3% for each 30 days the money is out, or $1,920 for one month. When the customer pays, the finance company takes back its money and its fee, and the rest goes to the contractor.
Purchase order financing suits orders for goods that are resold or installed with little added work; a partner will want the purchase order, the supplier’s quote and the customer’s credit standing.
How does inventory financing work for a Crawford County, AR HVAC contractor?
Inventory financing lends against stock the business buys and holds. The partner sets a limit as a share of the stock’s value, often lower for parts that are hard to resell, and the stock serves as collateral. As the contractor installs units or sells parts and is paid, it pays down the balance and can buy again.
- The contractor names the stock it needs and what it costs.
- The partner values the stock and sets an advance rate and a limit.
- The money pays the supplier, sometimes directly.
- The contractor reports stock levels on a schedule the partner sets.
- Each sale or installed job pays down the balance.
A Crawford County, AR HVAC contractor buys from distributors and wholesalers; the county had 16 machinery, equipment and supplies merchant wholesaler establishments in 2023 (County Business Patterns, NAICS 4238); the request can name the supplier, nearby or not.
Choosing among inventory financing companies as a Crawford County, AR HVAC contractor
Inventory financing companies include banks with asset-based lending groups, specialty inventory lenders, supplier and manufacturer finance programs, and purchase order finance firms. An HVAC contractor choosing among them can compare:
- The advance rate on its kind of stock, and how the stock is valued
- Fees per period and any minimum fee
- Reporting asked for: monthly stock counts, field checks, borrowing base certificates
- Whether the lien covers only the stock or all business assets
- How long a new order takes to fund once the line is open
A distributor’s own terms (net 30 or net 60) are a form of inventory financing too, and often the first one to use up before paying a third party.
An inventory financing example for a Van Buren, AR therapy office
A therapy or chiropractic office holds a modest stock: braces, supports, supplements, home exercise equipment and other products it sells to patients. Inventory financing for that stock can be a small amount over a short term.
Illustration only, invented figures: an office buys $7,500 of braces and supplies and finances it over six months at an annual rate of 14%. The payment is about $1,301.53 a month, $7,809 in all, of which about $309 is interest. If the products sell within those six months at a markup, the margin covers the interest.
The 37 offices of other health practitioners that County Business Patterns found in Crawford County, AR for 2023 were mostly small, with 27 under five employees (NAICS 6213). For an office that small, a credit card or a short credit line may suit a $7,500 stock order better than a dedicated inventory loan; a partner can say which it offers.
What inventory financing means for Van Buren, AR plumbing and HVAC contractors
Inventory financing means borrowing to buy goods for resale or installation, with those goods pledged as security. For a plumbing and HVAC contractor that covers stock (water heaters, condensers, fixtures), parts (fittings, valves, controls) and supplier orders tied to specific jobs. An auto repair shop uses the same idea for its parts room.
Crawford County, AR plumbing, heating and air-conditioning contractors paid $11.1 million in wages in 2023 at 23 establishments (County Business Patterns, NAICS 238220), and the county had 30 automotive repair and maintenance establishments (NAICS 8111). In both trades the stock on the shelf is cash waiting to be earned back, and financing it frees money for payroll.
For a cost that is not stock, such as a truck or a lift, see the equipment financing page; for the other options, see the six funding types side by side.
Stock needs vary by trade, which is why the industries page sets them out one trade at a time; the Van Buren, AR local page has the ZIP counts, and the inventory request form is the place to begin.
When a new machine raises output, the stock behind it grows too; the post on machinery financing for plants shows how to size that added material before the machine arrives.
By Claygrove Capital Group · Updated
