Purchase order financing is a type of short-term funding that enables businesses to purchase goods or services from suppliers without requiring the immediate payment of cash. It can be an invaluable source of capital when used correctly, allowing business owners to grow their companies quickly and efficiently.
The Basics of Purchase Order Financing
When it comes to the specifics of PO financing, there are a few key components to consider. For starters, the process begins when a business places an order with one of its suppliers and needs capital in order to pay for it. The business then contacts a purchase order finance company which will review their application and determine if they’re eligible for funding. If approved, the finance company will provide the upfront cash necessary to cover the cost of the goods or services being purchased from the supplier. Once these have been delivered, the finance company will take back their money plus any additional fees incurred during the process (such as transactional fees or interest).
When to Use PO Financing
PO financing is typically only available to businesses with at least several months of good sales history and a solid credit score. That being said, it can be an extremely helpful tool for companies experiencing cash flow issues or looking to take advantage of large orders that they would otherwise have difficulty paying for in the short term. Additionally, PO financing can be used by small businesses to take on larger client accounts and use the revenue from those sales to achieve rapid growth.
All in all, purchase order financing can be a great option for businesses that find themselves in need of short-term capital for large orders. With the right finance company on your side, you can ensure that your suppliers are paid on time and take advantage of the growth opportunities available to you. Contact Artis Commercial Capital to learn more about our comprehensive purchase order financing solutions.