Purchase Order Financing 101

Purchase order financing is ideal if you need to fill customer orders and need the extra cash to do it. As a business owner, you know that times occur when you just do not have adequate money available. This can result in you not having the proper supplies or products to fill orders. You do not want to get a reputation for not being able to fill orders, so turning to a financing option like this can help. Understanding the benefits can help you to make the best decision for your business.

No Additional Fees or Interest

This financing option can and does give you money when you need it, but it is not a loan. This means that you do not have to worry about interest fees and high monthly payments. This financing type has a very specific structure that works for both your company and the suppliers you are working with.

Protect Your Credit

Many institutions offering purchase order financing have non-resource factoring. This means that you have some protection against bankruptcy and this works to protect your credit. With this option, debt is assumed, so that you essentially start off with a clean slate. Make sure that you fully understand the terms that are associated with this since they can vary. You want to make sure that you reap the maximum benefits.

Payment Guarantees

When you utilize this financing option, there are either vendor or payment guarantees associated with it. This means that your vendors or suppliers know that they will be paid. This provides trust so that they will help to fulfill your orders without having to worry about not being compensated for their service.

You Can Handle Larger Orders

If you do not have stock on hand, you might have to turn down larger order. However, with this option, you can rest assured that orders of all sizes can be filled. This keeps your customers happy and can help to grow your business.

You Can Take Advantage of AR Management

Also known as alternative receivables management, this is a way to solve cash flow problems by helping to reduce uncollected invoices and improve how fast your customers and clients are paying your invoices. This ensures that you have more cash on hand.

As you can see, there are many benefits when it comes to purchase order financing. Now that you know how it might help your business, you can better decide whether it will help you.

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