What is Purchase Order Funding?
Purchase Order Financing or PO Funding enables you to buy from your suppliers (even if you have limited credit) to fulfill your client’s purchase orders. Typically, you can have invoice factoring without Purchase Order Funding, but you CANNOT have PO funding without Invoice Factoring. Your supplier will always need an assurance that they will get paid upon supplying the product. They will need a guarantee and Invoice Factoring is a solid one. Through this funding solution, they can get paid in two ways. One way is through Cash Against Documents (CAD), a COD term on steroids. The supplier presents the product, proof of quality and a copy of the bill of lading to the freight forwarder. Once the supplier gets paid, they release the bill of lading (title) to the goods, and the invoice can be factored.
Another would be through a Vendor Guarantee. Once the invoice is issued to the buyer/ account debtor, the invoice will be factored, and the supplier gets paid. It also allows you to fulfill larger orders without applying for a loan. The PO finance company can pay your suppliers, so you won’t have to turn away clients anymore.
Cash Flow Issues?
Have you experienced being unable to fulfill orders? Have you been short on cash and had to decline a large order from a new prospect? These are familiar scenarios for small businesses. You have plans of expanding by catering to larger orders, but you may not have available resources. In any business, cash flow problems exist. If your business needs cash to fulfill orders, it would be a more significant challenge to cater to all orders. Without the resources to purchase supplies, you can’t meet the demands of your clients.
It would be ideal to have a never-ending supply of cash at the snap of your fingers. However, we all know this is impossible. Earning money is not easy. If your business lacks working capital, you need to look for alternative ways to get it. There are several ways you can take advantage of. You need to evaluate which option would be the best one for you.
Solutions to Cash Flow Issues
One common alternative would be traditional bank loans. However, you also have to consider that bank rules have become stricter. It takes longer for a loan to get approved. If you ever get accepted, you get access to money, but this could cause more problems. Loans add debt to your balance sheet, and you need to pay those on schedule.
Another alternative is Purchase Order Funding. It is different from invoice factoring which accelerates the cash from your invoices. PO Funding pays suppliers or offers them vendor guarantees. Through this, your suppliers can provide you with the goods that you need. Purchase order financing is more beneficial because it can give a more instant solution to your supply issues.
If you are a product re-seller or distributor and need capital to deliver a large purchase order, then purchase order financing can be a solution to fuel your business. With the cash inflow, you can give your orders and grow your business. PO financing enables you to make sales that exceed your current financial capabilities.
Who uses Purchase Order Funding?
Many startups and growing businesses use PO Funding to fulfill large orders. As a startup company, the most prominent concern is to have access to working capital and have constant cash flow. ARfunding.org funds to many industries but not restricted include:
Whether a Non or Under-Bankable Relationships business or Bank Exiting, ArFunding.org will help your business grow by meeting your needs. Unlike other lenders, we will fund Fast Growing Clients with sales of $30,000-$10,000,000 per month within 24 to 48 hours. There are no hidden fees.
How Does PO Funding Work?
In PO Funding, you contact the PO Finance Company. The first option would be for them to pay your suppliers on delivery using Cash Against Documents (CAD) or issue your supplier a Letter of Credit. It will cover the cost of the goods you need to complete an order. After the invoice is released to the end customer, the Invoice Factoring Company funds the invoice(s). The factoring company will deduct the fees, and they will charge the invoice payments. Whatever amount remains will be returned to the company.
The company in need of funds can also make use of Vendor Guarantees. It is a cheaper, quicker and less complicated alternative to Purchase Order Funding. The supplier relies on the factoring company’s guarantee for the payment. The vendor must agree to produce the goods. Once goods are produced, ARFunding.org can provide either of two guarantees-CAD or Vendor Guarantee.
• Cash Against Documents
As soon as the supplier ships the goods directly to the end user and present the proper document proof, the Invoice Factoring Company pays the supplier.
• Vendor Guarantee
The moment the end user accepts the goods, the invoice produced will be factored. The funds from the factored invoice will be wired directly to the supplier.
Why You Should Choose ARfunding.org
At AR Funding.org, we understand you. We know that as a small business, you want to expand and grow your business. Also, we appreciate that resources may not always be available. We want to help you make sure that you can cater to orders, be it small or large. It is very important in establishing customer loyalty and building the reputation of your business.
What are The Benefits of Purchase Order Financing?
- Purchase order financing is not a loan
- Purchase order financing Pays Your Suppliers or gives them Payment Guarantees
- PO financing allows you to take more significant orders
- PO funding with ARFunding.org includes collections
- You can leverage our fulfillment and logistics expertise