Financing Your Printing Company With Purchase Order Funding
Purchase order funding is one option for businesses looking to finance their printing company. Debt is another. There are however, several problems associated with using debt to raise capital. For one, it creates a burden because it has to be paid back. Every month (or whatever the agreement) businesses have to come up with ways to ensure that they are able to repay what they owe. Purchase order funding is a great way to improve a company’s cash flow, is far less problematic then a loan and allows companies to generate capital extremely fast.
Besides the disadvantage of taking on new debt, bank loans are also very difficult to qualify for. Companies that have the worst time are those that have poor credit or have just opened for business. Today, it is even difficult for established companies with decent credit ratings to find a bank that will loan them money. Banks have suddenly become very stingy.
Purchase order financing is an alternative option that has been around for some time but for some reason, has been underutilized. That is quickly changing. As companies are finding that it impossible to raise money via traditional methods, i.e., bank loans, they are turning to Factors and PO financing.
Purchase order financing could save the day for a printing company that needed to quickly raise capital in order to pay for the supplies necessary to fulfill a large order. For example, let’s say that Printing Company XYZ received a $1million printing order from the Center High School District, but does not have the money to purchase enough ink to print out all of the agreed upon documents on their printers. Under normal circumstances, they might approach a bank and apply for a loan but these days, the banks aren’t even willing to accept their application. A sympathetic fellow business owner suggests that they contact a Factor. They do and find out that the Factor is willing to give them a line of credit so that they can purchase the ink, in exchange for them paying them back after they receive payment from the Center High School District, plus 1% of the profits. Relieved that they are able to fulfill the contract, Printing Company XYZ, gladly accepts and keeps Printing Company XYZ’s phone number of speed dial.
The above, is an example of purchase order funding in action. A company, known as a Factor opens up a line of credit so that a business is able to secure the materials they need to fulfill a specific job. The factoring company is then paid back the money they spent on the supplies plus a percentage of the profits from the sale, after the invoice has been collected. This might be a great commercial financing option for a printing company, and many other types of businesses for that matter. It allows them to get the money they need to pay their suppliers and fulfill orders that will infuse much needed capital into their businesses. Invoice funding is a fast, simple and effective way to improve a company’s cash flow so that they can continue operating, even with little available cash on-hand.