Use Purchase Order Financing to Fund Rapid Growth
Any business will struggle fulfilling large or unexpected orders if they don’t have the working capital to cover the costs associated with those orders.
Purchase order financing allows you to borrow money secured by the PO itself. The PO finance company steps in and pays your suppliers, allowing you to fulfill orders beyond what your working capital can support.
There are many reasons why a business might struggle with large purchase orders. A company may be experiencing rapid sales growth, large seasonal sales or they might be undergoing a recapitalization.
When you need funding to help you fulfill your customers’ orders, purchase order financing is a great option.
Purchase Order Financing Explained
A PO financing company will make direct payments to your suppliers so that you can receive the raw materials, sub-assemblies or inventory you need to make finished goods for your customers. You may also be able to finance other direct costs such as increased staffing costs.
A related, but different financing option is accounts receivable financing, which is when you sell your invoices for a quick infusion of cash that can be used for any business purpose. AR finance is often paired with PO finance.
Key Steps in the PO Finance Process
Customer (buyer) orders product and issues a purchase order to the Client (manufacturing/service company using PO finance)
Client orders product or parts from domestic and/or overseas suppliers (and/or assemblers if applicable) to fulfill the PO
Client requests PO finance company to pay Client’s suppliers upon documentation and shipment
PO finance company confirms payment method with supplier
Supplier produces product and readies product for inspection
PO finance company arranges inspection/confirmation of product to confirm product is as ordered
Supplier gets paid (either by drawing on a letter of credit arranged by the PO finance company or through wire transfer from PO finance company)
Supplier ships the product
Client delivers the product to the Customer and sends an invoice
PO finance company gets repaid either through payment from the Customer or through an accounts receivable factoring/financing transaction
PO finance company pays the Client the purchase order amount less fees
Questions? Call or text 203-247-4358
Better Than a Traditional Loan
PO financing is more flexible than traditional lending.
Banks generally won’t lend against purchase orders without some other form of collateral, and in most cases the approval process takes weeks or months.
A purchase order financing company needs only the purchase order itself as collateral, and can quickly setup payments to your suppliers.
The PO finance company will also need to review your operational capabilities because they only get paid if you deliver a product and generate a good-to-pay receivable upon delivery.
Benefits of Financing With Purchase Orders
Provides working capital fast
Grows your market share by fulfilling larger projects
No long term debt or dilution of equity
Discretionary and revolving — finance new orders at your discretion
Improves credit with suppliers
Potential Uses for PO Financing
Fulfill large B2B orders
Pay third party suppliers and assemblers
Delivery, installation and other direct costs prior to invoicing
Conserve working capital for other operational needs
Questions for us?
You need a strategic, cost effective solution to your financing needs and a financing advisor you can trust. And one who never takes upfront fees. Let us put our decades of banking and structuring experience to work for you – email Speritas Capital Partners about asset-based purchase order financing today.
Call or text Jeff Bardos, CEO
directly at 203-247-4358
Or schedule a call.
