Purchase Order Financing Can Grow Your Business
If your small business is looking to grow, you are probably looking for funding to aid your expansion. Several financial solutions can provide the capital needed; one simple and popular option is purchase order financing.
This form of funding allows your business to purchase additional merchandise or supplies without tapping into your cash reserves. A purchase order financing company will cover the costs of your invoice by paying your supplier directly. Your business then reimburses the financier after you have sold the goods to your customers or received payment on invoices from the order. The factoring company generally agrees to cover anywhere from 70 percent to 100 percent of the cost of the PO in exchange for a fee. While purchase order financing is not a traditional loan, lenders can handle collections for you if your clients fail to pay an invoice.
The advantage of purchase order financing is that many factoring companies work with clients that have poor credit, cannot get conventional bank loans, or experience rapid growth on a seasonal basis.
This type of financing allows for expensive, larger projects that were previously out of reach due to a lack of cash-on-hand or a lack of credit. If you receive a substantial order from a client but do not have the funds to place the order, purchase order financing lets you place and sell the order with little upfront cost and significant profit after you resell the goods.
When it comes to growth, purchase order financing has the following advantages over other sources of funding:
You will not give up any equity in the transaction.
The financing is flexible and easy to scale.
They allow you to build up inventory in anticipation of a busy period, enabling you to get seasonal merchandise to your customers quickly.
If your business is looking for flexible funding, a scalable tool for growth, or a boost in seasonal merchandise, then purchase order financing may be a good fit. The team at Flipside Capital can help you understand your options; call us today for more information.