Grow Your Business With Purchase Order Financing

Purchase Order Financing For Growth

For new and small businesses, hitting that stride between making sales and filling customer orders is a goal to be celebrated. Employees are paid, clients are happy, revenue is generated, and money can be set aside to focus on long term projects. However, what happens when a customer wants to place an order that is much larger than your business can handle with its available resources? Do you turn down a big sale only to have the customer take their business to your competitors? Do you take out a business loan and go into debt? In order to solve these situations, and give businesses the ability to grow, there is purchase order financing.

What Is Purchase Order Financing?

When an unusually large customer order comes in, a business will apply for purchase order financing. This covers the cost of production, labor, supplies, transportation, and everything else involved in filling the large order. Once the order is completed, the company providing the purchase order financing sends an invoice to the customer. When the customer pays in full, the financing company subtracts the amount that was advanced to your business, plus a small fee. The remainder is then delivered to your business as revenue. This is how companies take on larger customer orders and then reap the revenue to focus on business growth.

No Debt On The Balance Sheet

Most business owners think that in order to get the capital needed to to grow and complete those large customer requests, they must take out a traditional bank loan. The problem with this is that banks have adopted more conservative lending practices over the years, and fewer than 20% of all business bank loan applications are approved. Additionally, bank loans place debt on the balance sheet, which impacts your business credit rating. Purchase order financing is considered a sale on future receivables, so it does not register as debt. Also, your business credit rating remains intact, and you can leverage that for long-term financing to take your business to the next stage of development.

Fast And Easy To Arrange

Purchase order financing agreements can be arranged in under 48 hours and funds are made available almost immediately thereafter, for qualifying applicants. Bank loans can take weeks to process, which can prevent businesses from pouncing on time-sensitive opportunities to make larger sales and fill customer orders. If your business is focused on growth, and you want to be able to take on larger customer orders or cater to a wider customer base, purchase order financing might be the ideal solution for you.

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