Purchase Order Financing: Growing Your Business When Capital is Scarce
When own a business, the main threat you face on a daily basis is a shortage of cash. This never happens at an opportune moment, and severely cripples your ability to grow and advance your business’s development in proceeding months and years. Fortunately, there are other options available, namely purchase order financing. This is an arrangement which any business owner can use to help your business grow when their cash flow is a bit on the low side.
What is Purchase Order Financing?
This is an option available to businesses that are classified as resellers, not manufacturers or distributors directly connected to the manufacturer. In this arrangement, when you receive a large order from a customer, you can contact your P.O. financing company, which then decides whether or not they want to purchase your orders from you. This can depend largely on the creditworthiness of the customer in question, a detail that’s taken into consideration more closely than your business credit throughout the process.
First and foremost, pursuing this course of action is much cheaper than taking out a traditional loan in the long run. Overall, you’ll simply be giving up a small cut of your profits at the end of the day in the form of a fee to the factoring company. This is cheaper than repaying a loan on a monthly basis, because it’s not a recurring expense unless you opt to use the service repeatedly.
It’s also an excellent way to generate fast cash. This is especially useful for small businesses that are experience rapid growth, and are having trouble keeping the cash flow to support quick expansion or large projects or orders that might arise as a side effect of increased interest in the company by the public. Rather than waiting weeks or even months for payments, you’ll be able to get the cash you need right away. You’ll be able to spend this cash as needed to support healthy development.
Finally, a purchase order financer actually gets involved in your deal, and pays your supplier directly. This takes a great deal of weight off of your shoulders as the owner of your company, and allows you to pay a bit more attention to the parts of your small business that need I the most.
Whether you’re looking for fast cash, better lending rates or are just looking for a way to make business easier in general, purchase order financing is worth checking out. Speaking with a professional is the best way to analyze your needs and determine your candidacy for this arrangement.