In recent years, purchase order financing has been gaining traction in the marketplace as a funding solution for distributors and resellers that need money to pay their suppliers. It solves a common problem – what to do when you have run out of working capital but still have purchase order to fulfil.
This type of financing covers the supplier expenses associated with a specific purchase order and enables you to fulfil large orders. When used correctly, it can fuel explosive growth, allowing you to take your business to the next level. You can learn more how it work by reading “what is purchase order funding?”. This solution has three important benefits.
Benefit #1: It works with large orders
Perhaps the biggest benefit that you can get from this program is that you can use it to finance and fulfill large purchase orders. It removes the limitations that are imposed by your current working capital. Which means that you no longer have to scramble to try and find a way to pay suppliers. Or worse, turn an order away because you ran out of money.
Benefit #2: It can adapt to your business
Most financial products, like business loans and lines of credit, have maximum limits. This means that you can only use the line up to a certain dollar amount. PO financing does not have a limit per se. It focuses on each specific transaction, and the size of the line for that transaction is determined by:
- The creditworthiness of your client
- The reliability of your supplier
- The risk of the order
- Your ability to execute the order
Because of this, a small distributor/reseller that has good clients, reliable suppliers and experience in the industry can qualify to finance very large transactions.
Benefit #3: It’s easy to get
Most purchase order financing companies have easier qualification requirements than banks. Aside from having solid clients and reliable suppliers, your company should also:
- Have unencumbered invoices
- No tax/legal problems
- Not sell products on consignment or guaranteed sale terms
- Have gross margins that exceed 20%
- Finance orders over $100,000
The program can also be deployed quickly. Most lines can be underwritten in a couple days and the first order can usually be funded in 5 to 10 business days. This makes it an ideal option for distributors that have a large opportunity and need a quick solution.
Get more information
Are you looking for purchase order financing? We are a leading finance company in Canada and can provide you with a competitive quote. For information, get an online quote or call (877) 300 3258.