Purchase Order Financing Can Give Your Business Stress-Free Financial Flexibility
Are you looking for a straightforward way to improve your ability to purchase presold goods for your business? Neal Business Funding offers purchase order financing that may be right up your ally. This type of financing is a great alternative to traditional loans because it’s flexible, doesn’t require perfect credit and can help you if you’re struggling with low cash flow.
What is Purchase Order Financing?
Companies have a lot of resources available to them when it comes to finding a funding source. There are banks, commercial lenders, credit cards, and many other ways to get capital into a business. Not a lot of business people have heard of Purchase Order Financing, but it’s an old, valuable and cost-effective way to capitalize a company. Purchase Order Financing has been around for a long time and it is a smart way to get financing without sacrificing the company balance sheet.
In the Beginning …
A long time ago, some Pilgrims landed on Plymouth Rock. They brought with them what they needed to colonize a new land. They also brought something else; something that had been around the European continent for hundreds of years. It was a financial tool called “Factoring”. Factoring involved loaning money in exchange for placing a claim against property. Back then, factors extended credit against a cattle herd or a wheat crop. The Factor provided the funds needed to purchase the calves or wheat seed and then waited until the cattle or wheat crop were sold to receive repayment plus interest. In America, Factoring continued and evolved into a new form of commercial financing called Accounts Receivable, Inventory, and Purchase Order Financing.
How Purchase Order Financing Works
The idea behind Purchase Order Financing is as simple today as it has been for centuries. Get the money needed to do business and pay it back once they have concluded the business. For example, a commercial remodeling customer orders a new set of windows to be installed by a door and window company. The window order is for over $100,000 and the cost to install the windows will be over $50,000. The customer gives the door and window company a Purchase Order for the project for $250,000 to cover costs plus overhead and profit. The door and window company can not afford to pay for the window order and wait until the job is done to collect the payment. There’s too much money going out getting the job done before the money comes back.
With purchase order financing, they can get an advance on that purchase order right away in order to pay for the window order. Of course this will cost a few percent, but this will allow the company to do this job and make the profit which will more than cover the cost of using purchase order financing.
Where the Money Comes From
Many business owners and managers would try to get a large down payment from the customer, That wouldn’t cover the costs of doing the job. Progress payments would help, but that still comes up short for cash flow. They could go to the bank and get a short term loan. Most bankers want the business assets as loan collateral but also want personal assets as loan collateral most times. There is an easier, faster, and in many situations, a more affordable way to get money for completing the job without going broke in the process. Why not let the windows, labor, and everything else in the transaction finance itself? These items are all company assets; assets that can be used as collateral. Purchase Order financing takes all of these facts into consideration and provides a short-term loan against the value of those assets.
The World Isn’t a Kind and Loving Place
Many small businesses, new businesses, and struggling businesses don’t have an easy time with bank financing or any other kind of traditional financing choices. One thing small businesses, new businesses, and struggling businesses often have in common is a sub-par credit rating. Time can also become an important issue when trying to get a job done or a product delivered. Thirty-day or sixty-day terms don’t work for many vendors because the vendor has to pay for the products and services supplied to the customer before the customer pays them back. Sometimes it takes even longer than thirty days. Banks can take a long time deciding whether or not to loan money. Conditions often dictate what needs to be done to achieve success.
Financing as Easy as 1 – 2- 3
Purchase Orders are issued for a variety of products and services between vendors selling the products and/or services and businesses purchasing those products and/or services. A Purchase Order is a legally binding document that is considered a contract between parties. The value of that contract is a stated amount and the contract becomes a valuable asset for the vendor. More importantly, a Purchase Order’s value depends on the credit of the issuer, not the vendor receiving it. In other words, the credit rating of the buyer is the critical issue in the transaction. That is what Purchase Order Financing works off of, the credit of the buyer, not the credit rating of the seller.
Purchase Order Financing is a Snap
Because the Purchase Order has value, funding can be obtained from finance companies that work with this type of collateral. The best part is that once a business is set up with the financing company, the process of receiving money on future Purchase Orders happens quickly and easily. Many Purchase Order financing groups offer up to 90% funding of a Purchase Order’s total amount. The fees charged for the funding are extremely affordable as well. In many cases, the cost of getting the capital is around 2% to 3% of the amount financed. When this cost is compared to bank fees, loan origination fees, interest, and other charges, Purchase Order Financing becomes a real alternative to “traditional” sources of capital.
Why Apply for Our Program?
With all the loan products and lenders out there, you may be wondering why you should apply for our program. In addition to our client-centered lending approach, here are a just a few of the top advantages you’ll benefit from if you’re approved for any of our financial products:
- Reliable and fast funding
- Opportunity to grow your business more than you could with limited funds
- Ability to keep customers loyal and satisfied by providing on-time deliveries
- Greater financial flexibility that doesn’t require you to make equity sacrifices
When you have the funds you need to purchase presold goods and get them to your customers on time, your profits will increase.
Contact Us Today
Don’t put off success any longer by limping along with a limited or nonexistent cash flow. We’d love to give you the boost you need to start experiencing unprecedented success for your business. Contact us today and we’ll help you apply for our purchase order financing program.