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Purchase Order Financing

Posted by Namesplace.net Blogs on February 28th, 2010 — Posted in Finance

  Tags: Financing, Order, Purchase

Purchase Order financing provides you with the necessary financing to buy the goods from your suppliers, deliver them to your customers and close the sale. You can use purchase order financing even if your company doesn’t have credit. By using your purchase order from a customer (or the government) as collateral. It’s an ideal tool that can help a company grow past its current financial limitations.

Normal purchase order process is usually a 6 step process:
1.    You get a Purchase Order from your client
2.    The Purchase Order financing company pays your suppliers via a letter of credit or bank wire ( Normally a 1 to 2 week process )
3.    The order is delivered to your client, who accepts it
4.    You invoice your client
5.    Your client pays the invoice, concluding the order
6.    The transaction is settled

Purchase Order financing companies will normally only finance transactions that:

1.    Sell goods to reputable clients or government entities
2.    You have profit margins of 25% or more   
3.    Purchase Order funding needs from $100,000 to $20,000,000.

PO financing enables you to finance up to 100% of your supplier costs, allowing you to deliver more and bigger orders. Furthermore, purchase order financing has not arbitrary limits like bank financing and is directly tied to your sales. This means that all you need to do to obtain additional financing is to obtain orders from solid commercial or government customers.

PO Funding is an ideal tool for companies that sell 3rd party products such as wholesalers, distributors and resellers and are growing quickly.

In conjunction with your purchase order financing, you will normally have to have your factoring or accounts receivable financing set up with a factoring company also. Without having a factoring side set up, the purchase order financing may not be approved until you have it set up. USAFactoring.com provides a complete business solution to turn purchase orders into invoices.

Mark Fallon   V.P. of Factoring

http://USAFactoring.com

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