Does your company need to deliver a large purchase order? You need a substantial amount of money to deliver purchase orders, whether you’re a product importer, distributor, or reseller. Purchase order financing is a funding solution that allows you to secure the working capital needed to deliver your orders in a timely manner.

With purchase order (PO) financing, you can leverage your purchase orders in exchange for cash advances to your suppliers. The funding you receive allows you to accept new projects from clients even if you don’t have enough operational capital on hand. This gives you a chance to grow your business and take on jobs when cash is scarce.

Businesses from various industries apply for purchase order financing for different reasons, such as additional working capital, keeping up with customer demand, and more. Some of the companies that apply for purchase order financing include:

Distributors
Manufacturers
Wholesalers
Start-up Businesses
Government Contractors
Import Companies
Export Companies
And more

Here are some of the reasons why these businesses turn to purchase order financing:

1. It caters to startup companies.

Oftentimes, traditional loans and business lines of credit are only available for larger, more established companies. Lenders often require a three year’s worth of financial statements, growing cash flow, and collateral, which new companies can’t provide. Purchase order financing is suitable for new and growing companies, given that they have enough experience and traction with the purchase orders they want to fund.

2. The line grows as your business grows.

The size of your line depends on the following factors:

The credit quality of your client;
Your supplier’s track record;
Your business’ profitability;
The strength of your purchase orders; and
Your business’ capacity to execute the PO.

Fortunately, you can control most of these factors. This means that you also have control over the size of your line. Your line grows as your business grows, given that you meet the criteria.

3. You can accept bigger, capital-intensive projects.

Taking on bigger projects would mean spending more money. You will need to buy supplies, make payroll, and pay for overhead costs. And most of the time, you won’t get paid until the job is done. This setup may seem impossible to take on large projects, but PO financing enables companies to accept large-scale jobs from your trusted clientele. You’ll be able to receive and an advance to pay for supplies and overhead while waiting for your invoices. This gives your business an opportunity to grow tremendously without sacrificing much.

4. PO financing is not a loan.

Even though it works like it, PO financing is not a loan, but rather an advancement of funds. The financing company/lender pays your supplier for the materials and costs needed to complete a project. Afterward, the financing company will then collect the invoice; minus the money they advanced you, as well as a small fee. Conventional loans can be really expensive and hard to secure. With a purchase order financing, you don’t have to take on additional debt to grow your business.

5. You can secure funds faster.

After completing the application process and qualifying, it only takes a few days to set up your account. Additionally, subsequent transactions are usually faster than the first. Purchase order financing is a great solution for companies that need immediate funding.

Apply for Purchase Order Financing Today!

If you want to know more, we’ve created a step-by-step guide to purchase order financing just for you. You can also speak with one of our trusted lending experts by calling (888) 853-8922 or emailing at info@smbcompass.com.