Purchase Order Financing is a type of commercial financing that allows a business to finance the inventory they need to fill an order using the purchase order from the client as collateral. Purchase Order Financing enables a company to process large orders and expand production without worrying about depleting cash reserves. Purchase Order Financing can revolutionize growing businesses by increasing working capital needed to support and enhance sales Increasing product availability, creating flexible credit terms for customers, and to better compete with larger companies.
With Purchase Order Financing:
Benefit #1: It allows you to take on new large orders
The main advantage of using purchase order financing is that your company is able to take on large orders. This ability allows you to maximize your growth
Benefit #2: It’s available to new companies
Purchase order financing is available to new companies and small businesses as long as the company and the order meet the qualification criteria. This benefit is an important advantage over loans and lines of credit that are available only to established companies that have assets, cash flow, and a track record.
Benefit #3: It can cover up to 100% of your supplier costs
The solution can cover up to 100% of your supplier costs, as long as your gross margin is 30% or more (this percentage varies). This benefit allows your company to fulfill a large purchase order even if the company is under-capitalized
To get an idea of the maximum amount the finance company can contribute to your supplier costs, multiply your sale price to the end-buyer by .70 (70%). For example, let’s assume your company is reselling the goods for $100,000. Multiplying $100,000 by .70 equals $70,000. The finance company can cover 100% of the supplier expense up to$70,000. Note that the 70% maximum varies based on transaction parameters.
Benefit #4: The line grows with your business
The line can grow as your business grows. Unlike loans and lines of credit, your line is not constrained by your assets. The size of the line is determined by the strength of the purchase order, the credit quality of your customer, the track record of your supplier, your profitability, and your ability to execute the order. You have control over many of these variables and, therefore, over the size of your line.
Benefit #5: The line can be set up quickly
A purchase order financing facility can be set up quickly, assuming that you give us a full application package. Generally, the first transaction can be funded in one to two weeks. Subsequent transactions can be funded faster. This benefit makes purchase order financing an ideal solution for companies that need quick funding.
Requirements:
- Minimum Order of $50,000
- Articles of Incorporation
- In Business for 2 months+
- No Liens or Judgments on company
- Credit score not required