Purchase Order Financing for Small Businesses

One of the best ways of gaining credibility in the business world, and parlaying that into business growth, is to reliably handle those first few large orders you get from a customer. Your customer will have increased confidence in your ability and competence, and that will quickly spread to other customers as well – but what if you don’t have the financial resources to manage those first few large orders? The answer is – secure the financing you need from an alternative lender, so your future business growth isn’t stymied at the very first step.

Here’s how purchase order financing can be a great financing solution for your business.

How purchase order financing can help

Banks and other lending institutions simply can’t react quickly enough to satisfy the demands of business transactions like these, because they get too bogged down with paperwork. Even if they were more nimble, traditional lenders only extend loans on the basis of collateral, and not on purchase orders. That’s where an alternative lender can step in and help out.

A purchase order financing company can reimburse your suppliers directly for the materials you need to make finished goods ordered by your customers. Once you deliver the goods to the customer, the financing company gets paid for their service, and you receive the leftover amount as manufacturer. The entire transaction is then settled, and all three parties are satisfied.

Common startup strategy

Not all purchase orders are suitable for this kind of transaction of course, but for those which fit the necessary criteria, purchase order financing can be a boon to a small business seeking to become stabilized and experience growth. This strategy is frequently used by companies in their early stages of development, seeking to jump-start their operations and earn respect from competitors. When a small business achieves greater stability and begins earning regular profits, it’s entirely possible that other traditional sources of funding can be used to supplement cash flow, or even to fuel additional growth.

To learn more about purchase order financing for your small business, contact us today!

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