If there’s one thing it seems like your small business never has enough of, it’s cash. It can be stressful to attempt to grow your own business and manage the expenses of order fulfillment when you’re waiting on payments from your customers. On the other hand, you know that you need to offer generous repayment terms to attract the business in the first place. Purchase order financing offers a simple solution to this dilemma. It provides the cash you need to meet customer expectations while allowing you to pursue business growth at the same time.
How Purchase Order Financing Works
It’s easy to confuse purchase order financing with invoice factoring, especially when you’re new to managing the financial aspects of a business. While invoice factoring provides the face value of unpaid invoices, financing a purchase order means that a third-party organization provides funds to your supplier to enable you to follow through with fulfilling a customer’s order. Some of the most common criteria that companies use when determining whether to approve financing for a purchase order include:
- Both the supplier and customer must have acceptable credit. The bonus here is that the company offering purchase order financing doesn’t concern itself with your company’s credit.
- Your company must have an expected profit margin of at least 15 percent.
- B2B only.
- Your company must sell tangible goods.
When you receive purchase order funding, it coordinates with your company’s cash flow. That means it responds naturally to market upswings and downturns. By working with a purchase order finance company for each need independently, both you and your suppliers avoid costly payment cycles. Additionally, it’s easy to change the terms of purchase order funding to reflect supplies you legitimately need funding for and those you have enough cash flow to obtain on your own.
Are you ready to learn more about purchase order financing or to apply for this short-term loan? Contact Nations Capital Financing today.