Lots of people want to buy from your business? Need money to be able to do something? Think about financing the order.
Do you work with the government or with big businesses? Do you often get purchase orders that are too big for your company to handle? Lastly, could you sell more if you had enough money to pay all your supplier costs? A lot more?
Purchase order financing could help your business grow if you answered "yes" to any of these questions.
Purchase order financing is a way for US and Canadian businesses to pay for sales that is becoming more and more popular. It puts forward a very simple idea. If you have an order from a big business (or government agency) with a good credit history, the financing company will give you the money you need to pay your suppliers and make the sale. Call it financing based on sales. It works well for resellers, wholesalers, and distributors, but it can also be used in other fields.
Here's how financing by purchase order works. Let's say you own a business that has been getting bigger orders, which is making your cash flow tighter. Here's how your sales financing would work after you set up a purchase order financing agreement:
- The deal is finished when the client pays their bills.
- The order is filled and the goods are sent
- The purchase order finance company takes care of up to all of your payments to suppliers (by direct payment or letter of credit)
- A client gives you an order.
As you can see, purchase order financing lets you use the financing company's resources and helps you make more sales. With PO financing, you'll never lose a sale because you don't have enough cash on hand.
Purchase order financing is much easier to get than a business loan from a bank. It can be set up in just a few days. The most important thing is to have orders from good government or business clients. Most banks won't give you this kind of loan, but a factoring company will. In fact, purchase order financing and invoice factoring are often used together to cut down on transaction costs.
So, if you have a lot of purchase orders, you should think about financing with purchase order funding.
