Quite often it happens with startups and new product resellers which have very limited company histories, that vendors are reluctant to extend net payment terms to your business, and insist that you pay ahead of time. In such cases, either you need to have that kind of money on hand, or you have to look for more creative financing options, such as PO financing.

In PO financing, the supplier’s costs on large purchase orders are covered, so that you can take on orders for higher amounts than the actual capital you have on hand, and thus book the sale. PO financing is an option extended by some alternative lenders, and it offers some very appealing benefits.

Startups and New Companies Can Apply

Banks typically want to evaluate three years’ worth of good credit history before providing any kind of loan, because they are hoping to increase the likelihood of repayment. This is not strictly necessary for a PO financing transaction, as long as a startup or new company demonstrates adequate experience, and likelihood of success for the requested funding.

PO Financing Can Cover All Supplier Costs

As long as your gross margin is 25% or more, PO financing can cover 100% of the supplier cost, and in cases where gross margin is less than 25%, it can still work – although in this scenario, your company may have to contribute some amount to the transaction.

Your Credit Line Grows Right Along With Business

One very appealing aspect of PO financing is that size of the credit line extended to you will be based on factors not strictly related to credit-worthiness – for instance, the strength of the PO, your company’s profitability, your ability to fulfill the order, the credit quality of your customer, and your supplier’s track record . Since you control some of these factors, you can cause this credit line to grow right along with your business.

PO Financing Can Be Arranged Quickly

Within a week or two, PO funding can be arranged, assuming that all documentation is provided without delay. After the first couple successful transactions, it can go even faster because a record of success will have been established, and you will have demonstrated reliability.