How Businesses Can Use Purchase Order Financing
Purchase order financing can be an awesome tool for business owners who need assistance in building a solid customer base. For example, startups can take advantage of this type of financing to deliver products on time. Even if your company doesn’t have a lot of capital in the bank yet, you can still make sure your customers receive their orders. This helps to increase your reputation and the number of satisfied clients you have. How does this financing option work?
What Is Purchase Order Financing?
This loan option extends money to your suppliers for the products needed to fulfill customer orders. It all starts with a purchase order. When your client requests products, you can give the purchase order to the financing company. This company gives you a loan for the specific products and sends the money to your suppliers. A third party then delivers the products directly to your customers.
Once you have enough capital to buy all of your inventory yourself, you can comfortably send customers their orders personally. In the meantime, PO financing keeps your clients happy because they get everything they need quickly and smoothly.
What Are the Advantages of Purchase Order Financing?
There are several reasons that many businesses use this financing option regularly. For one thing, it’s easier to qualify for than other types of loans. This is especially true for startups and small businesses. Even if your business doesn’t have a stellar credit score, you can usually take advantage of PO financing without any problems. That’s because the financial organization only assumes minimal risk by using a purchase order option. The most important factor for approval is having customers that consistently pay on time.
Another advantage is that approval is usually faster than traditional bank loans. Instead of waiting several weeks to get the capital you need, many businesses can get approved for PO financing in a day or two. Once the program is set up, you can submit additional purchase orders even more quickly.
Purchase order financing is an alternative lending source that helps new and small businesses make good use of available capital. Instead of tying up large amounts of money in inventory purchases at the beginning, you should be investing in things such as equipment, computer systems, marketing, and other essentials. This financing option gives you the freedom to use capital for business growth and healthy cash flow. Best of all, you don’t have to wait for clients to pay you to buy the things you need.