The Advantages of Purchase Order Financing
Receiving a large order from a retailer, wholesaler, or other type of client is certainly exciting. Unfortunately, that excitement can turn to panic when you realize that your company doesn’t have enough funds available to complete the order before the deadline. Rather than pass on fulfilling the order and missing out on the revenue it would provide, you may want to consider purchase order financing for your business.
What is Purchase Order Financing?
Ideally, you want to use working capital to purchase the supplies needed to fulfill a large order. That isn’t always possible, especially when customers are slow to pay the money owed to your company, you operate a start-up organization, or you’re just coming off a slow season. Purchase order financing provides your company with the necessary funds to buy supplies and complete your client’s order on time. This type of loan is available exclusively to manufacturing companies since service companies tend to rely on unpaid accounts receivable invoices to obtain funding.
You may also hear purchase order financing referred to by one or more of the following names:
• Accounts payable financing
• Letters of credit
• Purchase order funding
• Supplier financing
• Trade financing
• Vendor guarantee
You can feel rest assured that each of these descriptions refers to the same process. The typical qualifications for financing via purchase order are that your company has business to business (B2B) clients and operates at a profit of at least 15 percent. The lender will investigate your credit history as well as current and past relationships with suppliers when making a loan decision. The rate of interest you pay depends on the volume of merchandise produced and the funds you use from the available credit line.
Advanced Commercial Capital Offers Purchase Order Financing and More
We are an alternative financing company that works with businesses to locate and obtain the best sources of funding. To start an application or learn more about our other business loan options, please contact Advanced Commercial Capital today.