Purchase Order Funding is a great tool to use when a small business needs capital to fill a large order. Purchase Order Financing Companies will provide credit, cash, or other accommodations to acquire or produce the goods for resale. Getting set up for PO Funding can be easy, depending on how complex your supply chain is. Here are a few pointers on how to find the best company to help finance your POs.
1. Find a Purchase Order Financing company that knows your industry.
Not all lenders are created equal. Some choose to specialize in different areas. They do this to differentiate their product, because of existing relationships, or because of past history. For example, not all Purchase Order Financing companies are interested in PO Funding for Government Contractors. Make sure you ask the sales person or underwriters which areas they are good at.
2. Make sure the Purchase Order Financing Rates are easy to understand.
There should be one price, based on the lenders exposure in the PO Funding transaction. Some lenders charge a transaction fee on top of the interest. This can add as much as 1-2% of the facility size to a transaction. Some types of funding can be more expensive than others. Work In process PO Funding rates can be almost double the cost of PO Funding for finished goods. Speaking of Work In Process, not all companies do it. So if you are in the market for WIP Funding make sure you ask the provider if they do it. PRO TIP: Star Funding, Inc. is one of the only trade finance companies today that does a lot of WIP Financing.
3. Confirm the geographic locations for the funding.
Purchase Order Financing in New York is easy. There are a few companies in the garment district that do a lot of work PO Funding for Apparel companies. Some lenders may or may not do work internationally. While most Purchase Order Financing Companies will handle imports, not all will handle funding goods for export. It’s really based on the accounts receivable factor on the back end of the PO Funding transaction. If they are OK with the risk of the resulting receivable, chances are the PO Finance company will be comfortable with purchasing the goods.
4. Find Purchase Order Financing Companies that offers multiple options.
Recently there have been a number of PO Funding companies that are very interested in coming up with new alternative ways of handling your POs. Companies like Star Funding will consider working with ecommerce companies that are selling direct to consumer through a marketplace like Amazon, Walmart, Best Buy, or Houzz. That’s pretty cool! They also offer a supplier credit program which I will cover on a later post. Long story short, if your lender is only offering one type of funding for a specific type of transaction walk away. You never know how your business model is going to change so you should be with a flexible lender like MRKT who has a number of products to offer and is always evolving.
5. Make Sure you Get Along with your Purchase Order Financing Company.
Purchase Order Financing Companies require a lot of communication and coordination between the lender and borrower. If there isn’t a good synergy there, walk away.
There isn’t one most important factor in finding a strong Purchase Order Financing Company. Most people look at price and use that as their determining factor. Truth is, the price is usually pretty insignificant in relation to the sales opportunities you are looking to get funding for. You want to make sure you find a lender that compliments your business and can help you take it to the next level.
MRKT Capital provides a variety of business loan options to support small businesses across America. Contact a MRKT representative today or apply through our website for a fast decision and quick approvals. You can secure purchase order financing in as little as 24 hours.