Purchase Order Financing

Getting a significantly large purchase order from one of your clients can very well be the opportunity you need to take your business to the next level. But not having enough resources to accept this order can be a real kick in the face, as you realize you have to turn it down due to lack of capital. This is precisely why many companies are turning to purchase order financing to cover them during spikes in demand.

The PO Financing Process

PO financing occurs when a company sells a purchase order to a provider or lender who has the capital to finance such a transaction. These lending institutions or “factors” will judge the credibility of your request by looking at the reputation of your company and that of your client. Upon approval, your factor will then take on the task of ensuring that the orders are met and delivered to the clients on time. At the end of the contract, the factor will then secure repayment of their capital in addition to fees based on their PO funding rate.

Advantages of PO Finance

1. Through PO financing, many entrepreneurs are able to upgrade their businesses and take on large orders in spite of their capital limitations. You can read about their experiences on this PO factoring blog. This financial tool has boosted the confidence of many entrepreneurs allowing them to venture forth into previously uncharted business opportunities.

2. It allows entrepreneurs like you to pass on the bulk of the capital risks and obligations to the provider, leaving you with time to improve your product and expand your client base.

3. The PO finance process provides you with immediate access to cash and operational assistance. As compared to loans that take time and a lot of paper work, PO financing works under a simple premise and saves you from the humiliation of declining a transaction due to non-availability of funds.

4. A provider guarantees a more cost efficient tool, as it is much more affordable than bank loans or credit card fees. Also, it is often not restricted by a credit limit, as they commit to completing your purchase order regardless of the cost.

5. Another benefit your company gets from this type of financing is that they only require payment once your company has been paid. As such, you will not be tormented by creditors and penalty fees if delivery is pushed back.

Purchase order financing presents a much needed solution to one of the most common problems facing businesses today, that of the working capital gap. Through these short term lenders many small businesses are finding it easier to go head to head with the toughest leaders in their industry.

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