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How Automotive Supply Companies Can Leverage Purchase Order Financing

How Automotive Supply Companies Can Leverage PO FinancingAutomotive supply companies can leverage purchase order financing in a way that enables them to acquire the materials and products they need to complete an order for a client.

There will be times when an automotive supply company is low in cash and perhaps unable to fulfill an order. Most will have no other option but to either turn down the business or attempt to get a loan. If the latter fails, then the decision is an easy and clear one, though not very profitable. They will have to turn away the business.

One alternative is to utilize purchase order financing. This is an option that many businesses fail to take into account. Often, this choice is to their detriment. Not only because it is one of the most effective and fastest ways to generate capital, but it also doesn’t require that a company must qualify for a loan.

When a business uses PO financing, they are essentially receiving an advance. This may take the form of actual cash or a line of credit. Once a company has a guaranteed purchase order in hand from a commercial or government client, it will be on its way to qualifying for PO financing. Moreover, it is important to note that Factors will have varying requirements.

For example, some will only agree to purchase order funding if a business meets a minimum monthly sales threshold. Some Factors will work with re-sellers or distributors or require a minimum percentage of gross profits for any order they agree on. Subsequently, it will be essential for businesses to research the requirements of each Factor to determine if they will be able to qualify for funding. A quick view of the factoring company website or a phone call will be sufficient to answer all of one’s questions.

Automotive companies may find that PO financing is especially useful when they are looking to grow and take on more prominent clients. A business may be able to support smaller jobs comfortably, but not have the capital necessary to secure larger ones. Many will first attempt to get a loan for this purpose. If they are not able to, then some will give up, not realizing the other options available to them.

Purchase order financing is a great one-way alternative. It is available even if a company has not been in business very long or has only an average-to-poor credit score. A Factor that provides purchase order financing will pay via cash or open up a line of credit. With a line of credit, companies can secure the materials they need to complete a job. These materials are then delivered to the company, where they fulfill the order and bill their client. After the monies are received, the Factor is repaid, plus any applicable fees. This straightforward process happens fast, is easy enough to begin once a company is deemed eligible. Also, it will enable a business to fulfill orders even when their working capital is low or limited.

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How Automotive Supply Companies Can Leverage Purchase Order Financing

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