When it comes to a small business or even a medium sized business, cash problems can and will happen. It is a complete devastation to have a client place an order and your company cannot compensate for the supplies needed to meet that client’s needs. This ultimately leads to not only a loss in profit, but it can also cause a blemish on your reputation with that client and potential clients in the future. In order to avoid this nightmare, every business whether involved in distribution, reselling, jobbers, or product importing, should know hire a factoring company to assist in improving your cash flow and also inquire about the benefits of purchase order financing.

Purchase order financing

With purchase order financing, businesses will be able to obtain the cash they need to fill a customer’s order or fill multiple orders, before an invoice has been generated. This will allows businesses to have the goods available to their clients, from their sources, despite any cash flow problems they are currently facing. This not only improves a company’s reputation, it will also allow the business to grow and profit at a much quicker rate. With purchase order financing, businesses will never have to turn down another client again.

The most important part of purchase order financing is the simplicity of it. If a client places an order for 200 items, the business will then need to pay the supplier in order to receive the goods. If the business is strapped for cash then they can turn to purchase order financing. This funding option will pay the supplier directly; allowing the supplier to produce the product and send it to the client. The business owner will then send an invoice to the client which will factor in the cost that the purchase order financing paid the supplier. Once paid, the business then pays back the lender for the financing.

invoice-factoring

Aside from the obvious benefits, purchase order financing has additional benefits that businesses should know. Most important is that it allows businesses to take on bigger orders that they couldn’t otherwise take on. Additionally, with this type of funding businesses are not required to have perfect credit like they would need for obtaining a loan. Purchase order financing is nothing like a loan, it is just an advance. The money is paid back through the invoice to the client and they only require an additional small fee for the service. Plus, they will take some of the hassle out of being a business owner by collecting payments from the client for you. It’s an all around win-win.