Growing your business will require funding, sometimes in sudden and unexpected ways as opportunities arise. This can especially be true in companies who get paid for products well after supplies are needed. For instance, if your next big order requires twice as many supplies as your last one, you may not have the cash to get what you need. This can result in having to find expensive short-term loans or even turning down potential clients. With purchase order financing, however, you can find better loan terms for buying supplies without having to send customers to your competitors.
Can You Benefit From PO Financing?
Not every company can benefit from this type of financing because it involves a third-party company sending a certified letter of credit to your suppliers in order to get the items that you need to make your products. If your company primarily deals in selling services, then PO financing will not be able to help; however, if you make and sell products, then this can be the best funding option available.
How Does It Work?
The process of purchase order financing can be easier than you think. You will first approach a company specifically set up to provide this type of financing and go through their unique application process. Most places will require that you deal in products not services, that your profit margin on the order will be at least twenty percent and that your customer is both established and credit worthy. Once that is done, the PO financing company will send a notice of credit to your suppliers and you can buy what you need against that line of credit. When you get paid, you will pay off the financing company as it has already paid the suppliers.
Where Can You Get It?
You can find this funding type online through various companies designed specifically for this purpose. This helps you compare rates and find one with experience working with your industry. The more experience a company has in your industry, the more likely your suppliers will be to have worked with it before and understand the process.
Purchase order financing can be a good way to help you grow into increasingly larger orders and expand your business. Many small companies can end up turning away valuable clients because they are unable to purchase the supplies they need to complete the order. To avoid this, you can find a PO financing company to help get what you need now and pay for it later.