LOCAL PURCHASE ORDER

In Nigeria’s business environment, contracts and supply agreements are at the heart of commerce. Yet, many companies and small and medium-sized enterprises (SMEs) struggle to fulfill large-scale supply contracts due to lack of immediate funding. This is where Local Purchase Order (LPO) becomes not just helpful, but essential.

At Cool Financial Services Limited, we understand the financial hurdles that stand between a business and successful contract execution. Our LPO financing facility is designed to provide businesses with the funds they need to fulfill verified purchase orders from reputable organizations without compromising liquidity or operational stability.

This article explores everything you need to know about LPO, what it is, how it works, associated risks, and why Cool Financial Services Limited is your ideal partner in contract execution.

DEFINITION OF LOCAL PURCHASE ORDER

A Local Purchase Order (LPO) is a short-term credit facility extended to a contractor who has received a purchase order from a client but lacks the funds necessary to procure and supply the requested goods or services. While this LPO represents a clear income opportunity for the contractor, it also comes with the responsibility to finance the purchase and delivery of these goods, often within strict deadlines. Essentially, it is a tripartite understanding between:

a. The contracting employer issuing the purchase order,

b. The contractor tasked with executing the order, and

c. Cool Financial Services, which provides the financing.

Example Scenario:

Let’s consider the case of Mr. Moses. He has been awarded a supply contract by Maritime Access Limited to deliver 500 bags of rice and 2,000 liters of cooking oil. However, he lacks the funds to execute this contract. Mr. Moses approaches Cool Financial Services Limited, where we assess the LPO, validate the contract, and provide the necessary financing to ensure timely execution without financial strain on the contractor.

This solution ensures that Mr. Moses maintains credibility with his client, fulfills the contract obligations, and profits from the transaction while we earn interest on the disbursed loan.

CRITERIA FOR DISBURSEMENT OF FUNDS

At Cool Financial Services Limited, we conduct a rigorous vetting process before disbursement of funds. The criteria include:

1. We conduct a thorough profitability assessment to confirm that the contract is financially viable not only capable of covering the loan interest but also generating sufficient profit for the borrower.

2. All pledged collateral must be genuine, possess substantial market value, and be free from legal encumbrances to ensure that ownership can be lawfully transferred when necessary.

3. The authenticity of the purchase order is confirmed by conducting a direct verification with the organization or individual that issued it.

4. A comprehensive offer letter is formally issued to the client, clearly outlining the terms and conditions of the LPO credit facility.

5. The LPO Agreement and the Sales Agreement must be duly executed by the client and CFS, thereby formalizing the terms and conditions of the transaction.

6. Clients are required to contribute a minimum of 30% of the contract value before funds are released.

LOCAL PURCHASE ORDER FINANCING PROCESS

At Cool Financial Services Limited, we have established a streamlined and transparent process for LPO financing, typically executed in the following stages:

1. The client initiates the process by formally submitting a loan application accompanied by a complete set of essential documents. These include the purchase order, a duly executed award letter or contract agreement confirming the job, valid collateral documents as a form of security, and verifiable proof of their equity contribution typically a minimum of 30% of the total project cost.

2. All submitted documents undergo a thorough review process to confirm their authenticity.

3. Once all relevant documents have been submitted, they are forwarded to the legal department for a comprehensive review and verification process.

4. Upon receiving final approval, the loan disbursement process is promptly initiated. The approved funds are released within a maximum timeframe of 48 hours.

REQUIRED DOCUMENTATION CHECKLIST FOR LPO

1. Application letter

2. Purchase Order

3. Executed Contract agreement or award letter

4. Collateral Documents/ Evidence of Equity Contribution

5. Verification report

6. Evidence of Account mandate for Joint signatory

7. Executed LPO agreement with cool financial

WHY PARTNER WITH COOL FINANCIAL SERVICES LIMITED?

At Cool Financial Services Limited, we’re not just about providing money, we’re about building real partnerships. We understand that every Nigerian business has its own story, challenges, and goals, and we’re here to support you every step of the way with honesty, professionalism, and a genuine care for your success. Here’s what makes us different:

1. Quick and reliable funding: We prioritize your time by ensuring fast and reliable disbursement of funds, often within just 48 hours, so your business can seize opportunities without delay.

2. Flexible Repayment Plan: Understanding that every business’s cash flow is unique, we design customized repayment structures that are realistic, manageable, and aligned with your business cycle, making it easier to stay on track. Our goal is to help you grow not burden you.

3. Thorough Risk Management: Our comprehensive risk assessment and due diligence processes protect both our clients and our company, helping to create sustainable financial solutions.

4. Commitment to Transparency and Ethics: We believe trust is earned through honesty and consistency. That’s why we maintain complete transparency throughout the lending process, from application to disbursement and repayment. You’ll always know the terms, conditions, and costs upfront, and we don’t use ambiguous language to confuse our clients. We’re here to build trust, not just process transactions.

5. Building Long-Term Partnerships: At Cool Financial Services Limited, we’re not just looking for one-time deals, we want to be part of your journey. We’re invested in your success and are here to grow with you. We aim to become a trusted partner you can count on as your business expands and evolves.