Delivering large purchase orders require a significant amount of working capital. Large companies that have the working capital to spare will have no problem meeting customer demands. But what about startups and smaller companies? Whether you’re a product importer, reseller, or distributor, you will need additional working capital to deliver purchase orders. Purchase order financing is a great way to bridge gaps in cash flow. It gives your business the funds it needs to deliver orders to your customers.
Purchase Order Financing
Purchase order financing is a funding solution that gives businesses owners the funds to pay for raw materials or retail merchandise to complete customer orders before you complete an order. This gives you the flexibility to purchase the supplies you need to ensure timely delivery.
Unlike other financing options, purchase order financing is not a loan. Instead, it’s an advance against your future income. Once your customers pay their invoices, the money will go directly to the lending company, clearing your account. After subtracting a small transaction fee, the lenders will then give you the remainder of the payment.
Since purchase order financing isn’t a loan you don’t need a high credit rating to qualify. You just need to make sure that your client has a good payment history since they’re the ones paying for the funding.
Reasons to Apply for Purchase Order Financing
Still on the fence? Here are five reasons why you should consider applying for purchase order financing:
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Pay Your Suppliers
It’s frustrating to turn down big-ticket orders just because you don’t have the money to complete the orders. This type of situation happens because you have to pay your suppliers upfront while most of your clients pay one or two months after the job has been completed. Because of this, there’s a huge gap in your cash flow. Small businesses and startup companies sometimes can’t afford to take on new projects until their customers pay them. The funds from a purchase order financing allow you to pay your suppliers for the materials you need to complete customer orders.
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Accept Bigger Opportunities
While taking on bigger jobs provides an avenue for growth and expansion, it can also cost you a significant amount of capital. You’ll need to purchase supplies, pay for personnel, and cover day-to-day expenses. Since you wouldn’t get paid until the job is complete, it may seem financially impossible to handle large projects. Purchase order financing allows you to accept bigger projects from reliable clients. You’ll have the funds you need to pay your suppliers and complete the job, allowing you to grow your business.
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Purchase Order Financing Grows with Your Business
The number of money lenders will grant you depends on the strength of the purchase order, the track record of your supplier, your business’ profitability, your customers’ credit quality, and your ability to fulfill the order. Since you have control over these variables, you have control over the size of your line as well. As your business grows, so does your line.
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Available to Startups and Small Businesses
Business lines of credit, bank loans, and SBA loans are only available to established companies that can provide years’ worth of financial statements, strong cash flow, and collateral. Unlike these traditional financing options, purchase order financing works with new and growing businesses. However, they should be able to show that they have experience with the type of transaction they want to fund.
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Fast Funding
Bank loans often take weeks or months before they approve of a loan. Purchase order financing from alternative online lenders can be set up quickly once you complete the application process. The first transaction generally takes a week to process, but subsequent transactions are funded within 24 to 48 hours. Purchase order financing is a great solution for companies in need of fast cash.
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Not a Loan
As mentioned, purchase order financing is not a loan, but rather an advancement of funds already due to you. The financing company you’re working with will collect the invoices, subtract the funds they advanced you, and then charge a small transaction fee. Traditional business loans can be very expensive. If your company doesn’t have great credit or is relatively new, it can be hard to qualify for business loans. Purchase order financing makes it easier for you to access funds without taking out a loan.
Learns More About Purchase Order Financing Today!
Do you have a difficult time fulfilling purchase orders because of financial limitations? Purchase order financing is a great option for you. With the funds you receive, you can continue to meet customer demands and grow your business.