Top 5 PO Funding frequently asked questions and more
Secure Capital to fill your open POs with PO Funding from MRKT Capital
WHAT IS PO FUNDING?
Every so often a business owner or entrepreneur receives a large purchase order without having the working capital to deliver the goods. PO Funding is a great tool to use to help fill the larger orders you receive without putting a strain on your cash position. Also known as Purchase Order Financing, or PO Financing, these programs are typically easy to execute and create a win-win situation for the buyer, seller, and funding partner.
PO Funding Definition - Leveraging a companies purchase orders in order to secure funding to purchase, acquire or manufacture the goods for resale. In a Standard PO Funding transaction the Purchase Order Financing company will typically pay for goods directly from the manufacturer or supplier and ship goods directly to the end customer. There are more flexible forms of this type of funding such as Work In Process Funding and Supplier Credit Facilities.
FAQS - PO Funding Frequently Asked Questions
What is Purchase Order Finance? - Purchase Order Finance is another name for PO Funding. There are a few AKAs such as PO Finance, POF, Purchase Order Financing, PO Financing, etc. See above for the definition.
How Does Purchase Order Financing Work? - Many people ask how PO Funding Works. There are a few key steps to how the typical transaction happens and they are listed below.
- A company receives an order for goods to be delivered at a later date.
- A purchase order financing company finances the production or acquisition of goods for resale.
- Goods are delivered to the end customer.
- Company issues an invoice and sends a copy to their Accounts Receivable Factoring company* for funding.
- Accounts Receivable factoring company funds the AR and pays out the purchase order financing company.
*There are certain Factoring companies or Purchase Order Financing companies that handle both factoring and purchase order funding under one roof. We prefer this set up because it is easier to manage, less expensive to set up, and often provides additional cost savings on the overall business funding needs.
How to get Purchase Order Financing? - Securing a good PO Funding company is easy. Well, you are already on our website so let's get started! 🙂 All you need to have in order to qualify for this type of financing is a solid purchase order from your customer and a reliable vendor that can supply your goods on time and in good order. You will need to make sure there are no other secured lenders, judgements or liens, agains the business in order to qualify as well.
How Does Purchase Order Factoring Work? - Ok, so this isn't really a thing. You factor accounts receivables, not purchase orders. See the next question to learn more about Factoring or purchasing receivables.
How does factoring work? - This question may seem like it's not related to purchase order funding, but it is. In a typical PO Funding scenario the company is already working wit ha factor that provides the take out financing against the resulting AR. This has a few benefits. Primarily Factoring is less expensive than PO Funding so the sooner you switch over the better. So, how does it work? Factoring is when the "Factor" purchases your current outstanding AR and lends against it. In some instances the Factor provides Non-Recourse facility where they assume the credit risk of the end customer.
How much does PO Funding cost? - 2-4% per 30 days
Size - $25k-$10,000,000
Set Up - 5-10 Days
Term - Varies*
*(typically a 12 month agreement to fund multiple transactions)