Purchase order financing, or PO financing, is most often used by businesses for a specific transaction wherein the business needs money to acquire items needed to fulfill a purchase order they have received. As such, PO financing tends to be highly short-term, often times acting as a bridge when companies do not want to deplete their cash flow and/or also wish to gain financing that will aid in positive, long-term results without having to complete a transaction that would appear as a debt for the business. Purchase order financing is perhaps most powerful for businesses in that it allows cash to remain free for overhead and other critical business expenses.
Most purchase order financiers offer purchase order funding and purchase order loans, to determine which option is best for your business. Let’s look at how they differ and the ways in which each lends itself to a given situation.
Purchase Order Funding
Purchase order funding is great for small-to-medium businesses and vendors who supply goods and services, as it can help fund opportunities that traditional financing companies will likely not approve. PO funding is a quick way to fill any void that may exist between your existing, available resources and the resources needed to fulfill a contract.
PO funding allows you to take on contracts that can help grow your business and keep it growing, even in a weak economy. Moreover, PO funding provides an influx of cash that ensures your company can promptly fulfill a large order, and thus, you don’t stand the risk of missing out on profits due to time restraints. As PO funding is most often used to cover the cost of necessary goods, it leaves the vital funds of your business free to cover critical business costs, rather than forcing you to dip into them to take on a large order or contract. PO funding does not show up as a debt against your business and is delivered quickly.
Purchase Order Loans
Purchase order loans have seen a great rise in popularity thanks to more cautious and restrictive bank lending. PO loans are well suited to wholesales and product manufacturers who work on a large scale serving the likes of government agencies and national retailers.
PO loans do not have a long-term contract, but rather feature a daily rate based on the funds deployed. Suppose your business receives a large order, but does not have the available cash to fulfill the contract. A PO lender would investigate the credit history, not of your business, but of your customer, and determine if your business qualifies for a PO loan based on what they find. If your customer and the transaction are considered sound, your business will likely be approved for a PO loan. Once the contract is filled and the PO lender is paid, all of the remaining profits go straight back to your business.
If you think your business could benefit from purchase order funding and want to find out more, contact Advance Funds Network today at 888-310-3110 for a free quote. If you’re looking for quick, reliable, flexible funds to help your business take on that next big opportunity, purchase order funding could be the perfect solution.