April 19, 2024

Business Bib

Business & Finance Blog

What is Purchase Order Financing and How Can It Help Your Business?

3 min read

If your company does not have the cash flow to access the inventory to complete customer orders, purchase order financing can help. Learn all about it here.

Poor planning, unexpected expenses, and overreliance on credit are some of the typical financial problems small businesses face. Business owners tend to rely on business credit cards or lines of credit. Yet, these funding options aren’t the only resources available to cover unexpected expenses such as inventory for unanticipated orders from your customers.

Have you considered purchase order financing? You may have heard about it, but think only large businesses can take advantage of this option. Believe it or not, you can get this type of funding no matter the size of your business.

Want to learn how to use this financing option? We’ve got you covered. Keep reading for your guide to purchase order funding.

Purchase Order Financing 101: The What, How and Why About This Funding Option

Before you start considering this type of financing, it’s vital to understand what is a purchase order. This term refers to when your customer sends an order to buy a certain number of goods at a set price. Businesses often encounter problems fulfilling these orders due to not having enough inventory to supply the order.

If this sounds familiar, you may think getting a business loan, credit card or line of credit are your only options. Yet, you can get funding for your business by applying for PO financing. This type of financing allows you to get funds from a third party to cover your customer’s order.

The best thing about this financing option is the easy approval process. Your lender will focus on more factors than only your credit score. When it comes to extending purchase order funding, financial institutions focus on your customer’s payment reputation.

Ways Purchase Order Funding Can Help Your Business

This type of funding can improve your business cash flow. If you get more cash, you can start fulfilling larger orders, therefore, speeding your business growth. After you get purchase order funding, you’ll establish a long-term relationship with your lender.

This financial institution will keep providing the funding you need to cover your business needs if you meet your financial obligations. Also, purchase order funding won’t drain your cash since you won’t have to make monthly payments.

Instead, your customer will pay your invoice to your lender. The company will deduct the applicable fees, principal, and send you the remaining funds.

Should You Consider Alternative Business Financing Options?

You should always consider alternative funding options such as purchase order financing to improve your business cash flow. These financing options will help you focus on growing your business instead of your financials. Before applying for this type of financing, you should consult several lenders.

Start by searching online for “purchase order funding options near me” and narrow down a list of potential companies. Contact them and ask their representatives about their application process, approval requirements and potential fees.

While you may be in a hurry, it’s important to do your homework to choose the right lender. The best lender will provide fast funding and explain their process in detail. Don’t leave money on the table and get the financing you need today!

Did you find this article interesting? Keep checking the rest of our site to find more helpful tips and articles to grow your business.