How PO Financing Can Help You Fund Your Large Orders
Imagine the opportunity to complete a $5,000,000 job but having to turn it down because you don’t have the operating capital. This could be crushing to your business, not only because of lost revenues but also because it forces you to turn down a job that might bring prestige to your business. It’s hard to be one of the big boys (or girls) if you can’t complete big jobs. Being a new company or one with so-so credit can make things even harder because you may not have the option of borrowing the money that you would need to fund these big jobs. One option that many companies use is PO financing. This is one avenue that is available that can help provide financing for larger jobs.
To explain how purchasing order financing can help you fund big sales, let’s elaborate on the above example. Let’s say that a large company approached your business about a $5,000,000 job. This is a well established company with good credit history. You agree to take on the job and write them up a sales order. You quickly find out after doing a little financial digging that there is no way you can afford to purchase supplies to complete the job. A bit dejected, but determined to find a way, you contact a purchase order finance company. They agree to pay your supplier the money for the product, effectively fronting you the money. They then collect on the invoice to the client who the job was for. They turn this balance over to you, minus the amount they paid your supplier and any agreed upon fees.
Let’s recap. The purchase order finance company would have advanced you the funds that you needed to complete the big job, collected the money for the job, $5,000,000, from the client and then handed that money over to you. For their work, they will charge you a fee and will take back the money that they paid your supplier. As you can see, the purchase order finance process allows you to bankroll big jobs without ever having to set foot in a bank and without having to take out a loan. Furthermore, you don’t even have to collect on the invoice. Of course, to make sure that this goes smoothly, it is important that you work with a top notch purchase order finance company. They will be working with both your suppliers and your clients and you will want to maintain those relationships. You will also want to work with a company that will be able to collect your money as soon as possible.
Because of funding options such as PO financing, it is possible to handle big jobs even when your company does not have enough money in the bank or the credit to fund such large scale operations on its’ own. In this sense, a PO financing company acts sort of like a partner in your business. They can help you cover operational expenses while assisting you in growing your business.