Is Purchase Order Financing Right for Me?

Purchase Order Financing is a tool your business must consider if you are in need of Capital to complete delivery of a large scale order. 

Purchase order financing is a funding option for businesses that need cash to fill single or multiple customer orders. In many businesses cash flow problems exist. There will be times where there is simply not enough money available to cover the costs of doing business.  

Business Finance Options

Purchase Order Financing is best for small businesses and startups who need inventory, have solid history and are working with reputable suppliers. It is a highly effective solution to turning a lack of capital into much-needed supplies as quickly as possible.

How is a Purchase Order Transaction Traditionally Structured?

Here is how a purchase order financing transaction is usually structured. Let’s assume that your customer has placed a purchase order to buy $100 worth of widgets. Let’s also assume that your supplier charges you $70 for those widgets. Additionally, your supplier wants you to prepay the $70, and your company does not have the money to prepay for the goods. This is where purchase order financing comes in. The financing company can help you complete this sale by structuring the following transaction (assuming you have a financing contract in place):

1. The purchase order financing company reviews the transaction to ensure that it complies with the funding requirements.
2. The purchase order financing company pays $70 to your supplier directly. Depending on the circumstances, payment is made by letter of credit or by wire transfer. Note that payment to foreign suppliers must be made by letter of credit only.
3. Once the payment has been received, your supplier manufactures the widgets.
4. The widgets are delivered to the customer, who inspects and accepts them.
5. At this point you can invoice your customer. The transaction can proceed in one of two ways. You can factor the invoice and use the factoring proceeds to pay the purchase order financing company and close that line. The transaction would then proceed as a conventional factoring transaction. Alternatively, if factoring is not an option, the transaction can settle once your customer pays for the end goods.

Once certain conditions are met invoice financing can become a handy tool to grow your business.

If you have ever received a large order but you were not able to complete the sale due to lack of equipment, lack of staff or just a general lack of resources this may be the type of business financing you will need to compete in a larger marketplace. 

With a Purchase Order Finance strategy you will be able to, 

• Experiencing rapid growth
• Be more confident in searching out larger sales
• Not be concerned with traditional bank financing as your only source of funding

Purchase Order Financing

Purchase Order Financing Rates.

1. Rates are typically determined by the complexity of the transaction. Many people feel the pricing is adjusted for risk, but not really. PO Funding finished goods will always be less expensive than PO Funding a Work In Process.
2. PO Financing rates will vary based on volume and type of transaction to be funded. If you want to try and get better rates, make sure your presentation is buttoned up. If your lender feels you have everything in order they may feel inclined to give you preferred pricing. It shows you are organized and won’t be too challenging to work with.

If you work with a reputable Finance Company you should not incur any hidden fees. Everything should be laid out in front of you in black and white. 

If you are interested in working with a company that can provide you with a Purchase Order Financing plan to grow your business contact NorthWest Finance. Purchase Order Financing, Equipment Lease Financing, Invoice Financing and Merchant Cash Advances. Call us today!

Fuel Business Finance

Minneapolis St Paul and Across the U.S

612-615-8196

www.businessfinancingfast.com

Invoice Financing | Purchase Order Financing | Equipment Lease Financing |
Merchant Cash Advances