As a business owner, the availability of cash to run your business is one of your topmost priorities in most cases, purchase order financing. If you aren’t generating much, and your coffer isn’t buoyant likewise, investing in your business and settling your employees will be a herculean task.
That goes without saying that cash flow is king for every business owner. As a start-up or established business, have you ever found yourself struggling with cash flow issues? Maybe you’ve got an array of projects in the pipeline that requires heavy financing, or you’re trying to keep up with demand for your products or services, but you’re very low on funds.
These can be a nightmare for you, particularly if you don’t want to rob Peter to pay Paul. However, look no further because this article will be talking about Purchase Order Financing – the knight in shining armor your business has been waiting for!
Here on, we’re going to take a detailed look into:
- What Purchase Order Financing is
- How it works
- How you can leverage it to avoid cash flow issues, and finally
- The best place to get purchase order financing
Without further ado, let’s dive straight into it.
What’s Purchase Order Financing?
Payment order financing (POF), or Trade credit financing is a short-term financing option used by businesses to fulfill their working capital requirements. It involves a financial institution providing funding to a company based on the company’s payment order to a third party.
In other words, it is a type of financing where a bank or a financial institution lends money to a company based on a payment order issued by the company’s customer or buyer. The payment order is an irrevocable instruction from the customer or buyer to pay the company a specific amount on a specific date.
How Does Purchase Order Financing Work?
Purchase order financing as iterated above is a type of funding that helps your business fulfill large orders from customers. It is a short-term financing option that enables businesses to pay their suppliers for the goods or services needed to fulfill a purchase order.
Here’s how purchase order financing works:
- Your business receives a large purchase order from a customer but lacks the necessary funds to execute
- Thereafter, you initiate contact with a purchase order financing provider and submit the purchase order, along with other relevant documents such as invoices, supplier agreements, bank statements, and others, depending on the provider.
- The purchase order financing provider reviews the documents to determine the creditworthiness of the customer and the supplier. If approved, the provider will offer the business financing to pay the supplier for the goods or services needed to fulfill the purchase order.
- The supplier delivers the goods or services to the business, and the business delivers them to the customer.
- The customer pays the business for the delivered goods or services, which the business uses to repay the financing provider.
- Once the financing provider is repaid, any remaining funds are returned to the business.
So, moving onto the next agenda…
How Can a Partial Credit Guarantee Help Your Business Avoid Cash Flow Problems?
Here are a few ways how leveraging on purchase order financing will bring about massive growth in your business:
- Eradicate The Need For Obtaining Loans
Instead of relying on traditional loans, which can be difficult to obtain and come with high-interest rates, collateral, and tight repayment schedule, businesses can leverage purchase order financing to obtain the funds they need quickly and easily.
Apart from the processing fee Purchase order financing providers charge, no more hidden costs might pose a later threat, unlike traditional forms of loans. So, with PO financing, you’re provided with an instant source of capital, and you get to increase your working capacity while reducing your costs.
- You Get To Execute Larger Orders
One of the biggest benefits of purchase order financing is that it allows you to take on bigger orders than you would be able to otherwise. When you have a large order from a customer, you might not have enough cash on hand to pay your suppliers to fulfill the order. But purchase order financing provides you with the cash you need to execute the order and inevitably grow your business.
- You Get To Avoid Giving Up Equity
When seeking funding for your business, one of the options you consider is bringing on investors, right? However, this usually requires relinquishing a portion of the ownership or equity in your company. This can be a difficult decision, especially if you want to maintain complete control over your business.
Fortunately, PO financing allows you to obtain the necessary funds to fulfill customer orders and expand your business without having to give up any equity. By utilizing purchase order financing, you can take advantage of opportunities to grow your business without having to sacrifice any ownership.
- Reduces Loss Of Opportunities:
Turning down business opportunities due to a lack of cash flow can significantly hinder the growth and success of a business. However, businesses can increase their operational capacity and avoid this problem by leveraging purchase order financing, which allows businesses to obtain the necessary goods and services to fulfill customer orders, which in turn results in increased client outreach and strengthens their market position against competitors.
By utilizing purchase order financing, businesses can access ready cash, which signifies increased efficiency and enables them to take advantage of more opportunities for rapid growth. Whether a business has new orders coming in or is looking to expand, purchase order financing can provide a perfect chance to scale up and reach new heights.
Having alighted what you stand to gain, If you’re looking to experience business growth through flexible purchase order financing solutions, Earnipay’s PO financing solution is all you need to get started.
Our purchase order financing option guarantees you: flexible working capital, and quick and stress-free access to funding, with no hidden charges, as we provide cash for you to execute larger orders, streamline your cash flow issues and expand our company’s growth. Head on to earnipay.com now to get started.