Picture this: You are a business owner that deals in the sale and supply of furniture. Your business has gained traction over the years, and a real estate company recently approached you to supply furniture for their current projects. But the issue is you need more inventory to fulfil the order, and given the high transaction volume, you might have to drain your cash flow and even touch your savings. You’re wondering about the best way to navigate this situation since you can turn down this offer given the tremendous growth prospects for your business, and you want to be safe financially at the same time.
Our purchase order financing solution offers a readily available solution to your business funding needs. With purchase order financing, you can obtain the funding to pay your suppliers to deliver the inventory needed to complete your orders. This article will explore the meaning of purchase order financing, how it works, and other necessary information to get you started.
So, let’s dive right in!
What is purchase order financing, and who is it for?
Purchase order financing is a short-term solution for businesses requiring capital to fulfil outstanding customer orders. As a business owner, you sometimes get overwhelming orders with limited inventory to complete and no working capital to get more products from your vendors or suppliers. Despite how necessary cash flow is to the success of every business, the funding environment in terms of loans is unfavourable to small businesses in Nigeria.
In explaining how access to capital is one significant barrier to MSMEs growth, Small and Medium Enterprises Development Agency (SMEDAN) Director-General Olawale Fasanya had this to say;
”MSMEs in Nigeria are suffering, and some factors impacting their growth are beyond us. Many banks do not want to give them attention. ”
Similarly, according to a Federal Reserve survey, 70% of small businesses applying for a loan are either denied or do not receive the requested amount. As a result, the prospects of using loans to scale business operations are unreliable, and companies have to rely on other funding sources to meet growing demands.
Although purchase order comes with their technicalities, it is an easily accessible funding alternative for businesses that need to buy products and have limited working capital since processing takes a shorter time.
How does purchase order financing work
A typical purchase order financing would involve three parties; a business owner seeking funding for a purchase order, a purchase order financing company like Earnipay, and the supplier or vendor. Once you’ve confirmed a purchase order from a customer and you’re ready to use this service, here are some steps to take
Step 1: Reach out to a purchase order financing company
It would be best if you started by researching companies that offer this service. If you’d like to use our solution, contact us to initiate the process of purchase order financing.
Step 2: Submit Documentation
Companies would require businesses to submit specific documentation for the application process. To access our purchase order financing solution, businesses must provide the following;
- Proforma Invoice
- A valid Local purchase order
- List of past contracts completed.
- Most recent audited Financial statement/Management Account
- Irrevocable standing Payment Order
- 6 months’ bank statements
- Board resolution accepting the facility.
Step 3: Wait for the review
Following submitting the required documents, we will conduct a thorough review of the documentation within a maximum of 5 working days. Once we complete the review, we will provide your company with a detailed offer outlining the repayment terms and tenure.
Step 4: Review the offer
At this point, you must thoroughly review the offer to ensure the terms favour your business needs. Once satisfied, indicate your acceptance to proceed with the financing arrangement.
Step 5: Payment to your supplier
Upon receipt of your signed offer, we will disburse the fund to your vendors or suppliers for the required inventory.
Three ways purchase order financing can help your business?
If you’ve read up till this point, you’d agree that purchase order financing would do a lot of good to your business in terms of helping you fulfil a large influx of orders. We will emphasise the top benefits this funding solution can offer your business. They include;
- Scale your business
The goal of every business is growth. This growth could be in offering your products to large paying clients and taking more orders. However, this might appear daunting if you have cash flow constraints. But with purchase order financing, you can get the funding you need to satisfy your business growing demand.
- You would no longer have to turn down Customers.
Suppose you’ve ever turned down a bulk order due to the unavailability of inventory and capital to complete it. In that case, you’d agree it was an inconvenient yet necessary decision since you wanted to save your entire cash flow. Purchase Order financing offers a way out since you
would refrain from tampering with your finances.
- Dispenses with the need for loans
We established earlier in this article how reluctant banks and lending agencies are regarding small businesses. Therefore, purchase order financing is a solution to your business funding worries.
If you’ve been struggling with securing funding for your business, purchase order financing provides the funding you need and is a faster and easily accessible solution. If you’re ready to come on board and enjoy this solution’s possibilities, do not hesitate to contact us today.