Here’s the thing nobody tells you about getting that first million-dollar Costco PO: it’s not a funding problem, it’s a timing problem.
You need $500K to pay your supplier now. Costco pays you in 120 days. Banks won’t lend. Equity is slow and dilutive. Invoice factoring and PO financing have been around for thousands of years. And 20-30% of brands at major retailers use it.
Will Fischer is the co-founder of Spring Cash, a financing platform that helps CPG brands stuck between supplier invoices and retailer payment cycles. He’s also an angel investor in early-stage CPG companies, including Laurel’s, Ripi, and Whims. Here's what he thinks about financing growth without giving away your company.
* Note: Text answers have been edited for length and clarity. Full answers are in video. (We highly recommend watching!)
Tell us more about Spring Cash and what it does.
We were incorporated in May of last year. Our first customer was Isabel Washington of Laurel's Coffee. She was launching into Whole Foods and needed $100K to fund these order.
It was like, okay, does she go out and raise more equity and dilute herself? Or does she take this PO financing, and then her equity is not diluted. And so that allowed her to do an raise at a higher valuation because she'd already expanded into new doors.
So she started in August. And then we had our first seven customers by the end of September. Now we're at 140 brands funded with $38 million deployed.
So Costco just handed a new brand a million-dollar PO. Now what?
You might be doing $1 million, $5 million, $10 million a year. And then, Costco and Target show up and say, "Hey, here's a million-dollar PO." That’s literally half a year's revenue. How do you fund it? Do you go raise equity? But raising equity is hard. It's dilutive.
Do you go to one of these fintech lenders or a bank? They might say, "Oh you did a million last year. Here's $150K, $200K." But the inventory for that PO is half a million dollars, right? So it's not really solving the pain problem.
We take something old-school, which is factoring. As long as the PO has a quantity and a SKU, we pay your supplier and fund the inventory directly. Then we wait four to five months to get repaid by Costco or Target. And it's a great deal for the brand because you don't have to put any money out the door for the inventory.
Why doesn’t traditional debt work for CPG brands?
It's two lump sums payments, right? You pay for inventory, customs, and shipping upfront. Then you wait for the retailer to pay you.
Traditional lenders ask for daily or weekly repayments. But you’re waiting 60-120 days for Costco to pay. So they’re asking for cash back that you haven’t even earned yet.
We match your terms. We get paid 4-6 months later by the retailer. And because we’re built fintech-first and automated, it’s same day or next day approval. No origination fees, no minimums, just a monthly fee on what we fund.
But won't the retailer think brands are in trouble if they use factoring?
This is number one question I get from brands. "Is the retailer gonna be worried that we're doing this?" And I could see on the surface why you might think that. "They're paying somebody else. Does that mean we're in financial trouble?"
Factoring has been around for ages. Costco, Target, and Walmart all have dedicated factor portals because so many brands use it. At Nordstrom, 20-30% of their 1,000+ vendors use factors.
If anything, buyers see it as a relief. Their biggest issue is you don't deliver, but if somebody financing your inventory, there are higher odds the goods are actually produced and delivered on time.
What brands actually qualify for invoice or PO financing?
We have two buckets: One is the million-dollar-plus revenue. As long as you're not insolvent and you pass fraud checks, we'll be able to do the invoice factoring and the PO finance.
Other end of the spectrum, we kind of have a $250K revenue floor. The most important thing we want to see is, whether it's the PO or buyer awards, it has to actually have a quantity attached to it. It can't be like an email from Sprouts saying, "Congrats, you're in the forager program."
The exact rates or percent of your PO depend on your risk profile. But because we're getting repaid not by you as the brand, but by Costco, it really opens up the door for who we can work with.
How are brands approaching retail growth differently today than a few years ago?
When I started focusing on CPG in early-2022, rollouts were regional. Now, any time you talk to someone who’s with Target or Kroger, they're going national.
I personally think that's a bit of a disservice to the brands because you are setting them up for failure in a way if they can't perform. They put all this money into inventory at the expense of other opportunities.
Founders who are new to the space are like, "I get in the doors, that's it." But it's not it. There's trade marketing and the million and a half other things that go into it. And it's a lot easier to dial that in for a region than the whole country.
Some of the best founders I talked to are very focused nailing their region first, and then going nationwide. That nationwide launch is a one-time opportunity.
Will Fischer is the co-founder of Spring Cash, a financing platform built for consumer brands navigating long lead times, retailer payment terms, and uneven cash flow. In addition, Will is an active angel investor in pre-seed and seed-stage CPG companies, including Laurel’s, Ripi, Shift Naturals, Leche, and Whims.