Do you regularly get purchase orders that stretch your company’s ability to deliver? Do you sell to the government or to large companies? Lastly, if you had financing to cover all your supplier costs, could you sell more? Much more? If you answered yes to any of these questions, then purchase order financing could help your business grow.
Purchase order financing is a way of financing sales that has been gaining popularity with American businesses. It offers a very simple proposition. If you have an order from a large credit worthy business (or government agency), then the financing company will provide you with the necessary small business funding to fulfill your supplier payments and make the sale. The Interface Financial Group offers this product especially for resellers, distributors and wholesalers, although it can also be used in other industries.
Here is how purchase order financing works. Let’s say that you own a company that has been getting progressively larger orders, tightening your cash flow. After setting up a purchase order financing agreement, you get an order from a client, the purchase order finance company handles up to a certain % of your supplier payments (by direct payment or letter of credit), the order is then fulfilled and the goods are delivered, the PO financing company is then paid off by the factoring company including their fee and the transaction is settled. Once the customer pays their invoices, the factoring company then takes their advance and fee and send the client the remaining reserve.
The advantage with IFG Network is that since we offer both PO and spot factoring, you would be able to select which transactions to factor and which not to. Some of your customers may be willing to pay on delivery, in which case, you would not require the factoring portion of the transaction. As you can see, purchase order financing allows you to leverage the resources of the financing company and allows you to increase your sales. With PO financing, lack of cash flow will never be a reason to lose a sale.
As opposed to a business loan from a bank, purchase order financing is very easy to obtain and can be set up in a couple of weeks. The main requirement is to have valid orders from good commercial or government clients.
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