Using Purchase Order Financing for Your Small Business
Purchase order financing is a financing option you can take advantage of to fulfill large customer orders, even when you lack the cash flow to do so. Especially if you’re a smaller company, you may not have the funds to pay suppliers for goods and services. That’s where a purchase order finance company can step in to fill the financial gap.
A purchase order financing company can make direct payments to your suppliers, so that you can receive the raw materials and sub-assemblies you need to make finished goods for your customers. Here’s why purchase order financing can be highly advantageous for your company, and can help get you more established in the business world.
Better than a traditional loan
It may be impossible for you to qualify for traditional loan from a bank or other lending institution, because they will always be looking for some form of collateral, and the approval process generally takes weeks or months to complete. By contrast, a purchase order financing company needs only the purchase order itself as collateral, and with this in hand, it can then setup a payment to your supplier in a short period of time.
A strategy for achieving growth
If your company is a startup company, or is very small even after several years, you probably won’t have the resources to handle very large orders, because you can’t purchase the materials you need. One way for your company to grow is by establishing credibility in servicing these large orders and increasing your customer base.
By successfully completing several of these large orders, you can use them as a stepping stone to more business, and even larger transactions with customers. It will also put you on a sounder financial footing, which might then qualify you for a business line of credit or even a conventional loan from a traditional lender. It can be a big boost in the transition from small company to larger company, and can provide the impetus for additional future growth.