If worrying about how to fill large purchase orders was our worst problem, we would be in great shape! Purchase Order Financing is available to help small and medium sized companies fill large purchase orders for their credit worthy customers. Below you will find the basics on what PO Financing is and how to source the best purchase order financing company.
Definition of Purchase Order Financing:
Finding good Purchase Order Financing Companies:
This type of funding isn’tsuch a commoditized product like cash advances or accounts receivable factoring. This is because there are so many different ways a company can offer PO Funding services to their clients. When sourcing a lender it’s important to ask the following questions.
- How long have you been in business offering Purchase Order Finance? Because of the intricacies involved in this type of funding you need to make sure your lender is VERY experienced. In certain cases their accommodations rely on the creditworthiness of the lender and a short time in business will work against them.
- Are your LCs(Letters of Credit) special clause LC’s or other contingent LC’s? – With the LC market tightening up internationally there is some hesitation around accepting Letters of Credit. If a supplier is going to accept a Letter of Credit it needs to be legitimate and drawn off of a Top International Bank.
- What are your funding limits? – This question isn’t only about the size of deals they can fund. Some lenders also have restrictions around how much they will fund for a specific customer, how much they will fund in relation to total outstanding AR, etc. Make sure your lender puts these answers on the table before pulling the trigger.
Purchase Order Financing vs Accounts Receivable Factoring:
Oh, you are just going to FACTOR the POs? Absolutely not. There is a clear difference between factoring accounts receivable and financing purchase orders. PO Finance takes place during the production or acquisition stages of the business sales cycle. Accounts receivable factoring is when you have the opportunity to borrow against completed work or delivered product that has been invoiced and confirmed.
Funding your business is never easy. No matter how quick, how much, or how it’s done you need to take your time and find a lender that works for you. Mrkt Capital uses real people to deliver real meaningful business funding solutions. If you are looking for purchase order financing, reach out to a Mrkt Capital loan specialist today at firstname.lastname@example.org.