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How Purchase Order Finance Can Help Wholesalers And Importers

How PO Finance Can Help Wholesalers And ImportersWholesalers and importers are in the business of making goods, often in bulk, available to other companies or individuals so that they can sell them at the retail level. Having the capital to provide these goods is unquestionably essential.

If a company failed to raise the funds needed for materials and also the manpower to create those goods, then a wholesaler (or importer) will have to turn down those jobs. If they continuously fail to generate the needed amount of money, then they will eventually be forced out of business.

Because a wholesaler or importer may not receive payment until after their wares are delivered they carry both the burden and the risk of financing whatever products they are selling. This may result in a cash crunch, with them unable to meet their immediate and future responsibilities. One very good option that an increasing number of companies are beginning to consider, is purchase order financing.

Purchase Order Financing for Wholesalers and Importers

Purchase order financing is a way for a wholesaler or importer to get money upfront. Instead of waiting to receive the payment until after the delivery of goods, they are able to obtain capital even before they ship those goods out. This gives wholesalers and importers the cash they need for personnel, materials and whatever bills they have.

A company using purchase order financing will sell their purchase orders to a factoring company. The factor will purchase them at a discounted rate, often at around 80% to 90% of their full value. For example, if a wholesaler had a $100,000 invoice, then they might sell it for a factor of $90,000 or 90% of the total invoice.

This money would be paid to the company upfront and could be used for whatever purposes they deem necessary. The factor would then collect what is owed on the invoice. After they have done so they will return the remaining monies to the company they purchased the invoice to, minus find a prearranged fee.

When working with a factor, the most important consideration is the credit history of the invoice holder. If their credit is bad, then the chances are low that the factor is able to collect on the invoice. Thus, repayment must be completed immediately.

Factoring is also known as invoice factoring, invoice financing, or invoice funding. Factoring is not dependent on the credit history of the wholesaler or importer, but on the company’s customers. This might be great news for many companies, especially those either are new to the business and subsequently don’t have much of credit history and also for those who have a low credit score.

Factoring allows them to raise capital regardless of their credit history and without debt. Taking on debt can be risky. Whatever monies a company borrows, they have to repay. If a business takes on too much debt, then they may have trouble paying it back, putting the company at risk.

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How Purchase Order Finance Can Help Wholesalers And Importers

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