Small Business Purchase Order Financing

One of the greatest challenges for small product wholesalers is getting an order that is too large for them. Large orders are only good if you have the financial resources to fulfill them. If you can’t fulfill them, you risk losing the order – and the customer – to a competitor.

Being unable to handle large orders limits the growth of your small business. The only way to break this cycle is to get financing so that you can handle larger orders.

Why a bank is not an alternative

Trying to get financing from a bank often fails. Most banks do not provide loans against purchase orders. Instead, they provide loans against existing collateral.

The bank needs to review your company and its assets to determine if it qualifies for financing. Unfortunately, most small businesses do not have the assets, management requirements, and sales track records to qualify for conventional financing.

Finance your purchase orders

Fortunately, there is an alternative that can help you: purchase order (PO) financing. This solution helps small companies that have large orders and need funds to pay suppliers. Usually, the purchase order financing company pays your suppliers directly, either by direct deposit or by letter of credit (overseas).

The payment allows your supplier to manufacture and deliver the goods. This payment enables you to complete the order and book the revenues. The transaction settles once your customer pays for the goods.

This solution is simple and can be used any time you have an order that exceeds your financial resources. To learn more about how transactions are financed, read “How Does Purchase Order Financing Work?

Which orders qualify?

PO financing works only for transactions that meet the following specific criteria:

  • The transaction must involve finished goods
  • The transaction must have a minimum gross margin of 25% (this percentage varies)
  • The buyer must have good commercial credit
  • The purchase order must not be cancellable
  • Orders must be for a minimum of $50,000 (some exceptions can be made)

For more information, read our qualification requirements.

Use PO financing as a stepping-stone

Most small businesses use purchase order financing as a stepping-stone to conventional financing. They start financing purchase orders in order to grow the business and strengthen the balance sheet. Once they have reached these objectives, the small business is in a position to transition to a conventional line of credit.

How much does PO financing cost?

The financing rates vary based on the size of the transaction, the length of time that it takes to settle, and the general risk. To get an online estimate, fill out this form.

Get more information

We are a leading purchase order financing company and we work with small businesses. For more information, get an instant quote or call us toll-free at (877) 300 3258.