In a cash crunch? Need short-term cash that is not available from existing cash flow to meet a big order or to ramp-up sales? A great solution for some companies may be purchase order financing.
What is Purchase Order Financing?
Purchase order financing is simply a way for a business to fulfill its product orders by financing payments to suppliers for manufacturing and transportation. It can be a great way to keep up with customer orders when cash is tight.
Here’s how purchase order financing works. A customer places an order. You provide order details to your supplier(s). You request financing from a lender based on the purchase order amount. The lender pays your supplier. The products are manufactured and delivered to the customer. The customer is issued an invoice and pays the lender directly. The lender forwards payment to your company less its servicing fee.
Who Can Get Purchase Order Financing? How is it Used?
Companies that can use purchase order financing are those that sell or resell goods to customers including distributors, wholesalers, resellers, importers, exporters, and outsourced manufacturers. It is used typically by growing businesses that are working to fulfill large orders. It is exclusively used for production and shipping costs. Importantly, more and more financial institutions are offering purchase order financing.
When and How Can Businesses Use Purchase Order Financing?
Purchase order financing can be used when seasonal sales spikes occur, when a business experiences substantial growth, or when it faces continuing tight cash flow problems. It should be regarded as a short-term financing solution.
It offers these financing benefits compared to traditional business loans:
• Potentially easier qualification.
• Funding amount flexibility and reduced out of pocket costs.
• No guarantee needed in most cases.
• Quick funding.
• Lower risk.
• No burden on regular cash flow.
Seek Expert Financing Assistance
Contact Eagle Bend Capital, based in Westlake, OH for a wide range of commercial capital and financing solutions for business of all sizes. Our extensive portfolio of financing options can provide a great alternative to traditional banks.