How to get the capital you need for your growing company? If you are looking for a low-cost, quick and easy way to get the funding you need for your business, you should consider purchase order financing. You may be wondering how it differs from invoice factoring or other financing options. Here are five ways that purchase order financing can help your company.
Purchase order financing is an agreement between a company and its bank to finance the purchase of inventory.
Once an invoice is issued, the bank buys a percentage of that invoice from the company. For example, if a business has an invoice for $100,000 and they want to finance $60,000 of it through purchase order financing, they would issue two invoices: one with $40,000 worth of goods and services sold and another for $60,000. The bank would provide financing for whichever amount was less.
Purchase order financing can help your company in a variety of ways. For one, it enables you to purchase the inventory you need without having to wait for customers to pay. You will no longer have to carry any debt on your books and if the business fails before the purchase order is paid for, you are only out the cost of the goods purchased.
Purchase order financing can also be obtained by businesses with less than perfect credit or when banks refuse to finance your company's needs. The application process is short, simple and quick and takes just a few minutes to complete. It is also easy for small businesses that are looking for up-front capital because it does not require collateral or security. Purchase order financing is convenient and flexible with terms from 60 days up to five years. Finally, purchase order financing is more affordable than other types of capital like payroll advances or commercial loans because interest rates are lower and there's no long term commitment required.
Purchase order financing is an excellent option for businesses that want to raise capital fairly quickly. You can use purchase order financing to access the funding you need without having to get approval from a bank or other lending institution, which can be a time-consuming and often difficult process.
Some of the drawbacks to purchase order financing are that you have to be able to get a purchase order from a customer and there is a risk in your business. If you end up with a purchase order from one customer, but no other customers, then your company would have been better off with invoice factoring.
Purchase order financing is a great option for companies looking to grow.
Strategic advice on navigating businesses funding, from experts.
A small business line of credit can offer flexibility and the ability to borrow what you need when you need it. Understanding the terms and features, application process and alternatives is essential. By considering the pros and cons and evaluating your financing needs, you can determine if a business line of credit is the right choice for your small business.
If you are looking for a low-cost, quick and easy way to get the funding you need for your business, you should consider purchase order financing.