Funding for purchase orders is also known as purchase order financing. With funding for purchase orders, companies get access to quick, short-term financing, allowing them to take on new and large orders that they otherwise would not be able to take.
Here are 8 things every business owner and CFO should know about the funding of purchase orders.
Supplements existing capital sources and works in combination with other forms of financing.
Funding for purchase orders is short-term financing, usually lasting weeks or months. This allows it to easily work in combination with other financing that your company has secured.
Up to 100% financing for pre-sold inventory.
Companies that offer funding for purchase orders will provide you with up to 100% financing for pre-sold inventory.
Funding for purchase orders supplements or replaces equity investment and extending your working capital.Finance companies base the amount of funding for purchase orders on the value of the purchase order. For this reason, you get the working capital you need without giving up any equity. In fact, it is an excellent solution for working capital demands without spending equity funding on temporary supply chain requirements.
Purchase inventory with letters of credit or wire against documents without drawing on or reducing your line of credit.
The financing is directly tied to your new or current purchase orders and does not impact your existing line of credit.Additionally, your suppliers will be paid directly, in most cases via a bank-issued letter of credit or wire transfer. As a result, it will help ensure that you receive the goods needed to fill the order in a timely manner.
Inspection of finished goods anywhere in the world.
The purchase order financing company will arrange to have the goods inspected before they ship, helping to eliminate risk.
Businesses of all sizes, situations, and histories can get approved for funding for purchase orders.
When you apply for purchase order financing, the lender will look at the creditworthiness of your customers. Specifically because the funding is directly tied to them paying you for the purchase order. Therefore, this creates the perfect situation for companies of all sizes, situations, and those who lack good or enough credit histories.
The financing provides the needed funds for the goods to fulfill your new or existing sales.
The funds received from purchase order financing go directly to pay for goods supplied by a third-party manufacturer or distributor to fulfill confirmed, creditworthy purchase orders.
Your credit line grows with your business allowing for unlimited growth.There is a direct connection between the amount of financing you are eligible for and your purchase orders. That is to say, as your purchase orders grow, so can the financing that is available to you.