Imagine a booming business during the holiday season.
You, as a business owner, would be ecstatic! You would also feel a major sense of accomplishment that you finally made it.
But then reality sinks in…how in the world can you fulfill all these orders?!
Now imagine a scenario where something goes amiss and your business’s operations get disrupted for a week, two weeks, or maybe even a month. Suddenly, the business is having financial difficulties, and everyone involved is starting to get antsy and worried. Big, “locked-in” contracts are starting to look like they may slip through the cracks, and that could be the end of things.
- There are growing pains at every stage of a business’s operations.
- There are also moments where one may experience gaps in finances or logistics.
Purchase order financing is a solution to most of these problems.
PO funding fills the financial gaps with ordering and ensures customers get their goods.
The following provides an overview of purchase order financing, its benefits, and how your business can explore this financial option through Your FundingTree.
How Purchase Order Financing Works
Purchase order financing involves paying suppliers of another company for the goods needed to fulfill a job/obligation. This allows the client to receive their items without disruption.
The advance may not be for the entire amount of the supplies but often covers a considerable portion. In some instances, companies can qualify for up to 100% financing.
The process of PO financing is as follows:
- You receive and process a purchase order from a customer.
- You work with the supplier, confirming the details of the invoice, and decide if your business has the capital to fulfill the order or if you need to proceed with PO funding.
- Then you apply with a PO financing company—or several, if need be—whereupon approval, they send funding to the supplier so they may deliver on the purchase order for your customer.
- Your customer receives their goods. You complete the transaction, invoice your customer, and submit your invoice to your PO lender for factoring-in which proceeds are used to pay off the purchase order. Then the payment from your customer for the factored invoice is paid directly to the PO financing company.
- Once the lender receives payment from your customer for the factored invoice, they take a cut for their advance and financing fees, and whatever amount remains is deposited into your bank account.
The fee that the purchase order financing company charges depends on the terms and conditions of the loan agreement you have with them. The fee is often fair, especially considering that all parties involved usually see the deal to completion.
The Ideal PO Financing Candidate
Exploring purchase order financing begins by connecting with a PO financing company.
Your FundingTree facilitates this professional relationship between your business and purchase order financing lenders. The overall process is standard among lenders, but they each have procedures and requirements that you will need to fulfill.
The ideal candidate is one that is doing well, where everything is in place but there are growth and operational pains that PO financing solves.
Common requirements before undergoing the application process include:
- Being (typically) a B2B company where the customers buying goods are also in good standing, creditworthy, and trustworthy.
- Being a business that typically does not modify goods being ordered nor manufacture its products being sold.
- Having ample gross margins, decent credit, and a proven record of delivering goods and sticking to their agreements.
From startups to resellers, if you sell complete products and need funding, then PO financing is a viable option to stay on top of operations and meet company goals.
PO Financing vs AR Financing
Purchase order financing may sound a lot like another funding option: accounts receivable financing. The two of them fall into the factoring industry and are short-term financial solutions.
What are the differences between PO and AR financing? The answer is in the process.
- PO financing deals with the manufacturers and suppliers, ensuring products get to customers before your business sends an invoice.
- AR financing happens after an invoice was generated, where the client’s invoice is essentially sold to the AR financing company.
Getting access to funds with PO financing is only used for purchase orders whereas AR financing provides capital for goods and services that have been provided. PO funding carries a higher cost and stipulations but satisfies the ultra-important relationships one has with those providing goods they sell.
If your business requires more than just purchase order financing you need insurance, payroll services, etc., then visit our business services page to learn how we can help or call 704-904-0774 today!
Purchase Order Financing for Working Capital and Operations
Purchase order financing offers a fantastic short-term funding solution for those who need to cover temporary monetary gaps.
The financing solution is often associated with covering expenses during logistical, operational, or financial shortages. It is a wonderful way to explore opportunities for growth when your business may not have the ability to do so, given its current financial status.
Purchase order financing allows a company to:
- Obtain financing for pre-sold goods and inventory to promote business growth and opportunity
- Maintain their reputation as a business worth working with
- Continue to grow and expand
- And much, much more.
PO financing, when used correctly, can offer an interesting growth strategy. PO financing also leaves open the opportunity to take on different forms of business funding at different stages of your business’s growth cycle.
The Advantages and Disadvantages of PO Loans
With all the different types of business funding options, one cannot help but wonder why PO financing is the right option. After all, couldn’t your business cover these supply-side expenses through a traditional bank loan or with a credit line?
There are unique upsides to using purchase order financing for your business.
Advantages of a PO loan include:
- The funding does not add debt to your business
- Your business can take on larger orders without giving up equity
- Customers see their products delivered on time
- Used correctly, one can boost their share of the market
- Offer fast financing with simple qualifications
PO funding does carry a few downsides worth knowing before agreeing to the lender’s terms.
Disadvantages of a PO loan include:
- Not an option for businesses doing any product modifications or services
- There is still a delivery delay and added time from waiting for PO loan approvals
- The loans do not always offer favorable terms due to higher financing fees
- If not approved for PO financing, your brand may take a hit because it is having trouble fulfilling customer orders
What matters is that your customers get the products they ordered. If they are happy, then you will be happy, and your business’s operations will continue. The advantages often far outweigh the disadvantages, especially when this short-term financial option is used intelligently.
Why Use Your FundingTree for PO Financing Solutions
At Your FundingTree, we serve many types of commercial businesses: manufacturing, staffing, transportation, medical, retail, and many more. Your FundingTree is here to help any business, large or small, be it well-established with multiple locations or a startup.
Your FundingTree is set up to easily find PO financing lenders that best align with you and your business’s goals. Our knowledgeable and experienced staff are ready to help.
Why partner with us? Consider just a few reasons:
- Quick, easy, and free application
- Same day PO funding options available
- Access to our team of financial advisors
- Up to five PO lenders competing for your business.
How to Apply for Purchase Order Financing
Applying for purchase order financing through Your FundingTree goes through a simplified application process. The following steps are typically taken when applying:
- Submit your company’s basic information to Your FundingTree, and then you can speak with one of our financial advisors, so we are aware of your goals.
- We will work through every opportunity within our marketplace to find the best PO funding options tailored to your business’s needs.
- We will introduce you to several PO funding lenders, so you can compare their terms and conditions and pick what is best for you and your business.
- Upon being underwritten and approved, you could receive funding within a few days and begin the financial relationship as a borrower to your new PO lender.
The process is rather simple and quite smooth once you begin working with a great purchase order financing company. Your FundingTree makes that a reality.
Get the Most Out of Your Purchase Order Financing
Finding Success with Purchase Order Financing
A business that decides to take on a PO loan has a lot to consider because of the situation they might be in. A business needing PO funding should be prepared to integrate this type of funding alongside their determination to improve the business’s overall performance.
Here are a few tips when exploring PO financing.
Get Savvy about Seasonal Fluctuations
If a sudden bombardment of orders during shopping holidays has your business struggling to meet demand, then plan ahead! Bring on new employees, set aside more funds for the season, and negotiate better deals with suppliers as these times draw near.
Use PO Financing Correctly
Relying on PO loans for growth can turn into a vicious cycle if you are working with a lender with less-than-stellar terms and conditions.
Each time a PO lender takes its financing fee from your profit, there's a little less money for your business. If there is trouble with your lender, it may send the wrong message to your suppliers if there is a disruption in the flow of money.
Instead, try to find the purchase order financing lender that best fits your business’s needs. Also only use this type of financing when it makes sense, so you are not constantly cutting into your business’s potential profits.
Capitalize on Big Opportunities for Growth
PO financing offers the funding necessary to complete a massive order. This could be the make-or-break moment for your business!
Having that type of funding as an option so you can complete the order is not something to pass up, so keep your PO financing options available and jump on it when the time comes.
Purchase Order Financing Alternatives
Explore the business loan types that align with your company’s financial goals, needs, and purpose
Your FundingTree offers additional types of funding and business services for our clients. If you feel like PO financing is not the best option, then explore our other forms of business funding!
What other business loan types are offered through Your FundingTree? Consider a few:
Our business funding and business services are ideal for all industry types. Our online marketplace and expertise connect you to the best funding for your company’s financial goals.
Let us know your business’s purchase order financing requirements and provide us with the necessary details so we can meet your needs. We accommodate business owners that have multiple businesses that may require financing, and of all sizes and types.
We are Your Best Choice if Your Business Needs PO Financing
Your FundingTree is a marketplace established to help small businesses find the best interest rates and customer service. We are where banks and other lenders who offer purchase order financing compete against each other to earn your business, resulting in better terms for you.
Your FundingTree has been recognized by national broadcasters, such as ABC, CBS, NBC, and FOX, for the services we have provided to businesses, big and small, across all industries. We currently have an A+ rating with the Better Business Bureau which goes to show how satisfied our customers have been with our services.
Our 90-Second Purchase Order Financing Application
It takes less than 2 minutes to submit a free application for PO financing
In as little as 90-seconds, you can submit a purchase order financing application to Your FundingTree. All we need is some basic information about your business and if you need PO financing, then we will need the desired loan amount.
Our financial advisors use in-house technology and years of experience to help process your application as quickly as possible. Your business funding application comes with no obligations and it will not negatively impact your personal credit score or business’s credit rating.
Your FundingTree makes the loan application process as quick and easy as it can get! You will receive several quotes from PO lenders that align with your company’s financial goals.