Jordan Buckner (00:00)
Landing a large retail or corporate order can be a breakthrough moment for your CPG brand, but it can also put a major strain on your cashflow. I've been in this situation myself and it's not fun. So today I invited Rohit, who is the co-founder and CEO of Bridge, to break down how purchase order financing can help founders bridge the gap between opportunity and execution. Rohit, welcome to the show.

Rohit Mathur (00:24)
Thank you. Thank you for having me, Jordan. Yeah, I'm excited to talk about it. Like you mentioned, it is a huge challenge that we've seen and we're excited to be solving this problem for founders.

Jordan Buckner (00:32)
So to provide a little bit of context, I'd for you to just tell me a little bit about Bridge and what you do to help set the context.

Rohit Mathur (00:39)
Sure, Bridge is a business lending marketplace. We have two very specific use cases we focus on. One is related to hospitality, but the other one, which is super relevant for this discussion, is related to suppliers. We partner with Walmart, Best Buy, Dollar General, and others to help their suppliers get access to capital. One of those core pieces of access to capital is purchase order financing. And we believe we have the most extensive network of purchase order financing options on our platform.

And we have a team that has expertise in helping suppliers, entrepreneurs, owners with put sort of financing. And so we're based out of New York, we're an early stage company, but we're excited about all the help that we can provide to these entrepreneurs.

Jordan Buckner (01:19)
Yeah. And who doesn't need money to help grow their businesses. And I'll tell you, right, like I think in this alternative lending space, there are a lot of unnamed companies or like not very well known named companies, right? It's not like JP Morgan Chase Bank or Bank of America are the ones giving out these purchase order.

Financing options and so a lot of times there's companies you might have never heard about you're trying to figure out if they're legitimate or not I don't know about you, but every day I get at least five emails in my inbox They're like, hey, do you need financing for your business? And I'm like this sounds like a scam I'm just gonna put it in my spam folder I had no idea if it's legitimate or not and so I think finding reputable sources that are actually trustworthy and that don't have Terms they're gonna take advantage of you or is super important

Rohit Mathur (02:01)
Yeah, I think the problem that you noted is so important because there are a lot of unknown and no-name purchase order finance companies. And at least they're offering you a product that I kind of support. purchase order financing is something that I think is a good product that can help a supplier. But there are also a number of no-name companies that are saying they're offering purchase order, but are really offering you what could be a really predatory revenue-based financing MCA.

So I think that that problem of validation of, is this really what I think it is? Do I have to read all of the fine print in the 200 page document that they sent me? Is really important and having that validation from a third party to say, hey, look, this is what purchase order financing is. These are lenders that we've vetted. And by the way, there's a bunch of other stuff that you probably shouldn't do. And we're happy to warn you about it.

Jordan Buckner (02:48)
So tell me about what cashflow problems founders usually facing, especially when they're launching into new retailers, right? So a retailer says, hey, I want your product, let's bring you in. Here's maybe a purchase order for that initial amount, which if they're filling all the store shelves will be usually the largest order that you'll get from them, at least for a little while. Tell me about kind of what you've experienced with founders who are going through that.

Rohit Mathur (03:11)
Yeah, exactly, know, great question, right? So I think there's, I would almost break it down into two things, right? One, I think we've seen a lot of people, the way that they get validation for their products is through a marketplace business, right? Which isn't really eligible for purchase order because essentially you're getting an order on something.com, right? And they're giving you an order for five or 10 or 15 and you're fulfilling that, right? But I think

great moment for any brand is when,

one of these big box retailers say, hey, we'd like to put you on the shelves of 20 stores or 500 stores or 5,000 stores. Right now, all of a sudden, you've got the kind of amazing, amazing problem of being able to meet that order. Right? And I think the first three things that I've seen that founders and, you know, brand specialists kind of go through is, right, you you have this amazing moment of elation, but then you to figure out how am going to fulfill this order?

So if you're importing stuff from other countries, you've got to talk to your factories, you've got to see what they need. One of the things they'll talk about is, we need a deposit. You're all of a sudden putting an order that's really pretty big, I need a deposit. So that's one, right? How do you get that if it's a raw material or your finished product, whether it's from overseas or here, how do you get that product and how do you get the financing for it? That's one. Two is, you're probably going to need some working capital, right? If you were managing this as a three person company and all of a sudden you get an order for 500 stores,

You probably need two or three more people to help you do that. So you need some working capital to pay those salaries and kind of hire the right people. And then number three is as you think of that kind of entire cycle of when you get an order, when you order it, when you get a purchase order, then you get an invoice, then you get paid, you've got a lot of time within that space where there will be a bunch of other costs that will come up. And as you think of how you kind of bridge the gap,

Jordan Buckner (04:44)
Do it.

Rohit Mathur (04:53)
between the time when you get an order and the time that you get paid back for that order. All of those costs are kind of the things that purchase order financing can help with.

Jordan Buckner (05:00)
Yeah, and I think it's so important because even if you are sourcing ingredients, maybe have a contract manufacturer, you might have to order ingredients out five months in advance for that order. Even if you pay upon like shipment or even plus 30 days, right? Then you have to get that to your manufacturer. They have to make your product. You have to pay them. Then you have to get your product through usually distributor, direct to retailer, and then they might not pay you for 30, 60, 90 days. A lot of times on opening orders. And then so there can be

you know, six months to a year of cash that you have to float to support that order. by the way, while running the rest of your business and all your other sales channels at the same time. So it's huge tricky.

Rohit Mathur (05:39)
Yeah.

And Jordan, you know, what's amazing is through that period, if you're doing things right, your orders are going up. So the demand for cash is actually continuing to increase while the time that it takes for you to get paid is continuing to also increase. Right. And so not only do you need, know, people always think of this as binary. OK, I've got this one order. I'll fulfill this one order and I'll get paid for it. And even if it takes six months, I know that that's not how it works. You'll get this one order if you're doing it right.

Jordan Buckner (05:46)
Yes.

Rohit Mathur (06:07)
Two months later, you'll get the next order. Two months later, you'll get another order. And so now you're stacking your working capital cycle on top of each other. And this is common for any growing business. And so yeah, the need for financing is really important. Because obviously, this is a great problem to have, right? This is a problem of all these stores want you in 500 or 1,000 stores. You have to execute at that time.

Jordan Buckner (06:29)
Now, I'll say that there's usually two options that founders usually go to solve this problem of needing cash. One is they're seeking equity financing. They're going out to investors, angel investors, VC firms are saying, hey, look, to have this new deal with Walmart or Target, invest in our company to really support these. And the other, they're going after some of these financing tools, whether it's working capital, loan, purchase order financing, maybe a little later down, factoring, right? Once you get the invoice.

and there's all these different mechanisms, they're trying to figure out which one is right for me. And I'm kind of curious your perspective. I've kind of found that there might be some combination of both, but I even have made the mistake of primarily seeking equity funding for the business. And someone was explaining it to me that, you know, equity is great, but you're also, you know, what problem are you trying to solve? Is that a long-term solution for a short term problem? Right? Like if I just need cash for these six months,

and I can solve that and I don't have that same level of need or I need something bigger, what tool do I use? Equity, once you take on that investment, it stays with you for the life of your company, right? Like you need the money now, but it doesn't go away. You sell that ownership permanently.

Rohit Mathur (07:34)
Yeah.

Yeah, you I think it's very interesting about use of proceeds. Right? I think if you're looking for a partner that is going to help you invest in the business, right? You have to go and hire three people who will go become your sales channels and get you into these big boxes and, you know, buy all the product ahead of time, all of that stuff. That sounds like equity risk to me. Right? Because you're making an investment. You don't really have anything on the other end. You hope to have something on the other end. That's equity risk and that you should raise equity for that. Right?

or get friends and family or whatever. But then once you get a purchase order, that risk is different. That is now the execution risk and a working capital risk. And if you can, I wouldn't give away a piece of my company for that working capital cycle. Because that is essentially you're saying, hey, I know if I do these next three steps, I'm going to get paid this money back in six months. With the equity investment in hiring three people, you don't know if you're to get paid back. So that's equity risk where

There's huge upside, there's huge downside. But with the working capital cycle, it's kind of boxed risk. And I think that is best met with working capital financing solutions. But to your point, there are so many different types of sort of needs in that working capital cycle. And how do you go from one to the other? And I can imagine this being very hard for entrepreneurs and the ones I talk to feel that it's hard because, by the way, financing isn't your primary kind of role, right? You're trying to get.

amazing product and you're trying to get that delivered and sell it, but you also have to think about financing.

Jordan Buckner (09:05)
So let's dive into purchase order financing a little bit more. Tell me what it is as a financing vehicle and how it works specifically for CPG brands.

Rohit Mathur (09:14)
Yeah, and so I think the first thing with purchase order financing, and I think you brought this point up earlier in this conversation, Jordan, is that it isn't like it's being offered by the top five banks in America. Go Google purchase order financing and JP Morgan, Citibank, Wells Fargo, whatever, right? You won't find a lot of options, right? They're not the lenders that offer this. And so it's a market that is really occupied by these smaller, at times no-name lenders.

And the way we break it down is there's a bunch of traditional purchase order finance lenders who are doing things manually but have been doing it for 20 or 30 years and know it really well. And then there are a bunch of digital purchase order finance lenders that are new, that are fintechs, that are offering different types of working capital solutions. And so those are the two kind of types of lenders, right? The other thing about working capital, about purchase order financing to remember is that people call it by different names.

Some people will call it inventory financing. Some people will call it, I just need a working capital line of credit. Other people will call it purchase order financing. And so it really, to us, what purchase order financing is, that when you get an order, the different needs for capital that you have based on that order, is a promise, even if it's a cancelable promise, it's a promise to kind of get paid once you deliver the product.

It is all the needs for capital that you have to deliver that product, right? And that's what us is purchase order financing. And like I said, there's two different and distinct kind of ways to get it in terms of types of capital providers in the market. And obviously they all come with different rates and terms.

Jordan Buckner (10:48)
Now what does that typically look like in terms of what a company needs in order to apply or have a good chance of receiving purchase order financing in terms of like do you have to be profitable as a company? Does the purchase order need to be a certain dollar amount as like a minimum? What are some of those guardrails?

Rohit Mathur (11:05)
Yeah, you know, I think it's there's a lot more flexibility, I would say, versus getting a traditional line of credit where a traditional line of credit, if you go to a bank, they'll say, need two or three years of profitability, blah, blah, right? With purchase order financing, they're not as focused on that, right? They want to see that your metrics work. So if you're selling something for $2, they want to make sure that you're not making it for $10 because that doesn't really work, right? But as long as your kind of margins make sense,

It is essentially, you know, they are happy to fund purchase orders as a unique kind of product versus looking at your company as a whole over the last three years and over the next five years. So think that's one aspect of it. The second aspect of it, which you asked about, was kind of how does it work, right? So typically a purchase order of lending company will look at the actual order you've got. They'll try and verify it, you know, one way or the other to make sure that this is a legitimate order from one of these retailers.

and then they will try and understand through you who is the actual money going to. So if you've got a factory that you're manufacturing some of your stuff for you, they will actually send the money directly to that factory once they sign the deal with you. And so that's the other kind of different unique aspect of purchase order financing. I would think of it as short-term capital. So this is typically meant to be purchase order financing can be anywhere between one month

of financing all the way up to three to four months depending on how long it takes to manufacture your product. ⁓ And I would think of it as not inexpensive financing

Jordan Buckner (12:30)
Thank

Rohit Mathur (12:34)
alternative to some of the other financing options out there.

Jordan Buckner (12:37)
Have you found any terms of minimums like are these lenders looking for at least $100,000 as they're looking to fund, right? They're probably not going to maybe fund like a thousand dollar order or something.

Rohit Mathur (12:47)
Yeah,

I think they're very careful not to say a number on the low end because they want to see every deal. But I think 50 to 100 is a good benchmark. I think anything below that, I think you'll find it beneficial to use other types of lending sources. But once you've got to that 50,000, 100,000 order mark, that's when sort of financing really kicks in.

Jordan Buckner (13:05)
Are there any other requirements in terms of what makes for a good application that are going to get the best deal terms?

Rohit Mathur (13:12)
Yeah, look, at the end of the day, people want it. It's very hard to get your first purchase order financed. All of a sudden, big retailers will always test products. So all of a sudden, they say, yeah, sure. We worked with a company once that was selling cakes. And obviously, it was a very small operation out of the person's kitchen. And the retailer said, we'll test you in the five stores that happen to be right around your home, essentially, to see how good you are.

that purchase order is probably not getting financed, right? Because that is, know, what you're asking for money for is kind of ingredients and things of that sort. But if that same retailer, right, continued to build, got into some sort of industrial kitchen and had a process around it, their purchase order, which is maybe the third purchase order, which says, hey, it's no longer five stores, it's 100 stores, those are the ones that lenders will be willing to finance. And what is the distinction I'm trying to make there?

is that people are more reluctant to finance your first purchase order, but they want to see some track record. And once you've got your second, third, or fourth, that makes it a lot easier to prove that this is something that is getting repeat buyers.

Jordan Buckner (14:18)
One thing that I've seen in like the actual application process, I think this is what's challenging to find those right vendors in the right of financers is that a lot of times people might like ask other companies that they know or Google, you know, purchase order, inventory financing. And then the processes seem to be a little bit more individualized per company, right? And like the due diligence is very much like a lot of back and forth, maybe through email, maybe there's a simple form they fill out and an interview.

Rohit Mathur (14:38)
Yes.

Jordan Buckner (14:46)
So that can be kind of complicated. Is that what you've generally seen for going directly to those companies?

Rohit Mathur (14:52)
Yeah, look, that's what we're trying to change. I think essentially it's hard to find which lenders are out there. So like you said, you can Google, you can call people. it's number two, even if you find the 20 lenders, you don't know which ones want to lend to you. There are purchase order lenders that will say, I lend to certain products. Many of them will not lend to food products. So how do you know which is the right lender for what you're trying to do?

because no one in the world has enough time to talk to all 20 lenders and go through the diligence process for all 20 lenders, right? That's all you'd end up doing. And so I have noticed that each lender has its own unique process, right? A lot of the questions are similar. It's kind of like applying to colleges. There's no common app because you have to kind of go through each college's requirement. I think what we've tried to create is kind of a common app where you can come to one place, we can...

figure out with the right questions that all of them need to know, and then we can tell you, hey, these are the three or four that will make most sense, and let us kind of facilitate that process with those lenders. The other thing that I think is very important is data security. A lot of times, you're ending up getting on the phone with people, and they're saying, send me your stuff.

and you're just emailing out all your personal financial information, your order information, which you don't want your competitor to see how much you're selling your products for, right? And all of that, and I think what we've tried to do is that we try and keep things on platform.

which means that you're uploading information to a secure site, the lender is reviewing that information on our website, and then again, we've got experts that are kinda helping you through that process that are agnostic of the outcome. We just want you to get financing. We don't really care which lender you pick to get that financing. You're our client.

Jordan Buckner (16:29)
I love that. I love that concept of a common app for financing. And one thing I so important to like for brands coming in and using bridge is that it's completely free, right? For brands to go through the process and get financing through the platform.

Rohit Mathur (16:39)
Yes.

Yeah, absolutely. Look, we negotiate across that. And that's why we feel really excited about Purchaser Financing because we've got negotiated terms with all of the purchaser lenders out there. Right. So essentially, when you come to us, it should be more competitive. You should get the same, if not significantly better terms than you would go if you went to one of those lenders directly. Because we've got these partnerships and we can offer volumes and things of that sort. And we can offer choices to you and kind of make the process

that's more competitive. But yes, there's no cost at all to submit a request, to complete the process, to find the lender to get the deal done. And most times it's the lender that's kind of paying us our fee. We are still a business and we do make money.

Jordan Buckner (17:23)
Yeah, I think that makes a lot of sense in terms of how you get paid, which is by the success of actually placing loans, but you have so many options that you're not to force people into one specific deal. It's like, choose which one's right for you, where you vet at them, because we want you to be successful.

Rohit Mathur (17:38)
Yeah, we get a bunch of people who say, I use the platform, I saw the options, and I went to my existing lenders, and I was able to push them to do better, right? And I don't make any money on that, and that's fine. At some point, we also just want to help the community that is trying to do all this great work and bring all these cool and new products onto the shelves. And so while we see that on our platform, we will use it almost to get the existing lenders.

vendors to do better. That's still a great outcome and we encourage you to talk to us, have that conversation and see how we can help.

Jordan Buckner (18:10)
This has been amazing and I did not know anything about purchase through financing when I first started my CPG brand back in 2015-16 and it would have been so helpful to have known that as an option as a resource to help in growing my brand. When's the right time to apply for PO financing? Do you have to have an order in hand? Do you submit just your information to get approved based on your business criteria?

before that point wins that best time.

Rohit Mathur (18:38)
You know.

Oftentimes depending on your product by the time you get a purchase order. It's often too late Right. So a lot of times when you'll talk to the brand or to the retailer and they'll say hey, we're interested Here's an you know, lot of times it's an email that will say we would like to order X quantity from you Six months from now. That's the time to start talking to us, right? Because you know then we can make sure that we get all of that set up Get you with a lender, you know get that process started so that the day your actual purchase order

you're off to the races and you can get those financed. Right, so ⁓ I would say don't go too early, right? Like if you've just had an idea for a business, we're probably not gonna be able to help much, like build your business. But the second that you have a conversation with a retailer and they say we're interested in the product and we'd like to put you on our shelves, that is the time that you should call us and get started with us on the process.

Jordan Buckner (19:11)
I love that.

I love it. Cause they always say when you need money, it's often too late to get it. Apply early when you don't quite need it yet. And you don't take the money immediately, but once you're like, okay, we're ready. have the PO. and it's much easier to say yes. Cause we've done all the due diligence beforehand.

Rohit Mathur (19:30)
Yeah, that's right.

That's right. Look, there are times when it's too early, but more often than not, we see people coming when it's too late. And so we'd rather people come to us earlier, and we're happy to tell you, hey, this is exactly when you should come back.

Jordan Buckner (19:55)
Absolutely love that. Rohit, thanks so much for being on the show today and sharing about PO financing with our audience. For anyone who's listening in,

apply now, check out Bridge and their website is bridgemarketplace.com. We'll drop the link in the show notes as well. But we brought them on as a partner with Feebevy because we want you to get access to the financing you need to grow your business so that you can retain control, retain optionality and have the most likelihood for success. Rohit, thanks again.

Rohit Mathur (20:22)
Yeah.

Hey, thank you, Jordan, and what great work you guys are doing to get the information out there. And thank you for being part of this industry and helping get the word out about Bridge.