Factoring Blog

Benefits of Purchase Order Financing

Although po finance has been gaining popularity in recent years, the product is not well known in the mainstream business community yet. This article will outline the benefits that your company can get from using this solution. If you need a refresher and want to learn about it, please read what is purchase order financing before reading this article.

The dilemma

Most small re-sellers have a very simple problem. They have enough working capital and credit to cover small orders. However, they don’t have the resources, or the vendor credit, to cover a large order. Obviously, you need to be capable of handling large orders if you want to grow your business.

When a larger order comes, they are faced with two options. They can decline the order, and obviously lose the client. Or they can take on the order, but risk financial problems – or be unable to deliver. Obviously, both alternatives are bad. However, you can solve this problem by funding purchase orders.

The benefits

This program has a number of benefits that can help small re-sellers that have access to buyers and orders, but don’t have the funding to fulfill the orders.

It can help you take on larger orders

The most important benefit is that po funding lets you take large orders – those that exceed your financial resources. When used correctly, it can be used as a tool to grow your company exponentially. It’s a great option to finance a company growth without giving up equity to a third party.

You can leverage the credit of your buyer and the track record of your supplier

You can also leverage the credit and reputation of your buyers to your advantage. This is because your buyers credit acts as security and collateral for the transaction. Additionally, you can leverage the track record of your vendors who can supply quality products in a timely fashion. Combining your buyers, the right suppliers and this type of funding creates a powerful solution that can be used to your advantage.

It can grow with your business

As opposed to conventional financing options, the line has no ceiling/limit per se. The size of the facility is based on the credit reputation of your buyers, the capabilities of your suppliers, the size of your order and your ability to execute it.

It’s easy to get

Qualifying to fun your po’s is easier that qualifying for conventional funding solution. You need to have a good product, solid buyers, and great suppliers. Also, your company needs to be well managed and be profitable.

It can be deployed quickly

One important advantage of this solution is that you can usually get the first transaction funded in 5 to 10 days, provided all the due diligence and transaction set up goes well. And once the account is set up, new orders can be funded even faster. This makes it an ideal solution for companies that got a very large order and need a quick turnaround.

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