For a small business, a large purchase order can be a mixed blessing. On the one hand, it’s a chance to make big money and grow your business. On the other, it can keep you up at night if you don’t have the capital to cover the upfront cost.
What if there was a way to fulfill the order, grow your business and improve your cash flow at the same time?
I’ll tell you a secret: There is!
What is purchase order financing?
If you receive a purchase order of over $25,000 and don’t have the cash to cover the upfront costs, a purchase order finance company (or factoring company that offers purchase order finance) can pay your supplier or manufacturer up to 100% of the cost to produce or procure the order. The only thing you need to qualify is a signed purchase order in hand.
Purchase order financing allows you to take on bigger orders from new accounts and current customers. Unlike a bank loan that places a cap on your credit line, purchase order financing is unlimited. As long as you have a reliable supplier and credit worthy customers, the sky is the limit on your potential sales volume.
How does it work?
Purchase order financing is a simple method of capitalizing on sales opportunities that can grow your business.
Here’s how it works:
- You receive a purchase order from your customer.
- You submit the purchase order to the PO finance company (That’s us!).
- After a quick approval, we pay your third-party manufacturer or wholesale supplier up to 100% of the product cost.
- When the supplier ships the finished goods to your customer, we factor the invoice.
- A portion of the advance pays off your purchase order finance fees. The rest of the advance goes to you to help with cash flow.
- When we receive payment from your customer, the un-advanced balance, minus the factoring fee, will be wired to you as a rebate.
- Repeat this process with your next purchase order to fulfill large orders with $0 out of pocket cash on your part.
How does this help my business grow?
Purchase order financing helps your company grow in a few ways. It keeps your company moving forward on big projects, which means you can take on orders you might normally turn away because of cash flow limitations.
Accepting larger purchase orders puts your business in a new competitive category with your customers (and potential customers). Fulfill one big order and you’re more likely to get a second, and then a third, and so on. Soon, the order that once was too big to comprehend is your daily business.
Start-ups or small businesses with less-than-perfect credit can grow and improve their credit through purchase order financing, as advance limits are based on your customer’s credit, not yours.
Is your company ready to power up your purchase orders and start accepting bigger orders from your clients? Explore the potential of purchase order financing today!