A Quick Look At Purchase Order Financing

Finance is one of the most important aspects of running a business, no matter how big or small it is. Most companies have their own finances in place for investing in business, while some others get a bank loan whose funds are utilized in their business. But there are times when both these options may not be feasible for a business, especially in the case of small businesses. This is where the presence of purchase order funding firms comes to the rescue.

What is purchase order financing?
Purchase order financing is a funding option through which small businesses, which do not have sufficient cash flow or working capital to run the business, take financial aid in order to fulfill a huge order that they may have received. Purchase order funding provides the business with funds which it can pay upfront to suppliers so that the cash reserves of the company stay intact. It is mainly manufacturers, distributors or wholesalers that are eligible for a loan through purchase order financing.

How does it work?
In order to provide a loan, purchase order financing companies do a credit check on the buyer of the product that the borrower wants to sell. Once they are satisfied with the buyer’s track record, the lenders provide a letter of credit to the manufacturer that gives a guarantee of the payment of the required goods. The manufacturers then make the required products which are verified by a third party and get paid by the lender, post which the goods are shipped to the customer. The customer then makes the payment to the lender directly and the lender deducts its fee and sends the rest of the amount to the borrower.

Benefits of purchase order financing
There are several benefits that small businesses get by taking loans from purchase order financing companies. Here are a few of them.

–It is easier for businesses to qualify for this type of loan as compared to banking loans.

–The borrower does not need to have a great credit history; however, having a good credit history makes it even simpler.

–The best part of purchase order financing for the borrowing business is that the loan is dependent on the credit history of the buyer who will purchase their goods.

Purchase order financing has come across as a savior for small businesses who desire to grow but suffer from lack of funds by providing the required financial aid to fulfill big orders of customers.

For professional purchase order funding and financing visit: http://www.sterlingcommercialcredit.com/purchase-order.php


Now read this

Using Accounts Receivable for Financing

Accounts receivable financing can be defined as a method of asset financing wherein a company uses the money that is owed to it by customers, also known as receivables, as security for getting additional finances. The amount that the... Continue →