Cash flow challenges to fill large orders are an everyday occurrence for most businesses, whether you are a startup or an industry giant. The reality of having a business is that there will be days where you experience low cash reserves. But should you turn down valuable opportunities or take out a loan to fund your short-term financing needs? The solution to such a dilemma lies in purchase order financing or simply put, PO financing. It is one of the most convenient ways that your business can experience rapid growth even in the most turbulent financial periods. Below is a detailed guide into what purchase order financing is all about and how your business can benefit from it.
What Is Purchase Order Financing?
Purchase order financing is a type of funding that helps you to pay your supplier directly for product orders when you are short on working capital. If, for instance, you get an upsurge in purchase orders on short notice, your PO financing lender will help you get the necessary funding to fulfill your customers’ needs. This process allows you to have increased capacity, meaning you can take advantage of opportunities even while low on funds. Looking for more information about purchase order financing? Learn the difference between working capital and PO financing here!
How Does Purchase Order Financing Work?
Purchase order financing utilizes a 3 party relationship. The parties involved are your business, your supplier and the PO financing lender. The purchase order financing process begins once you receive purchase orders from your customers that are beyond your financial capabilities. It is at this juncture that you contact your lender, who then verifies that your customers will pay for the goods upon delivery.
Your lender then pays an agreed amount to your supplier directly, allowing you to deliver your products to your customers. Rather than your customers paying you for delivery of the goods, the supplier and lender first deduct their share of the payment. You get your profit after this, making it a win-win situation for all parties. So, instead of waiting to get more cash flow, purchase order financing allows you to have increased efficiency for your everyday operations.
5 Ways Purchase Order Financing Can Help Your Business Grow
1. Getting More Orders for Your Business
Imagine marketing your apparel business and getting an outpour of attention only to find out you do not have the necessary funds to keep up with the new demand. Before taking such a step, it is crucial to ensure that you have the necessary orders for your business. Getting apparel PO funding, for instance, ensures you can get more orders when the market demands it rather than waiting for the last minute. If you are looking to expand your business, PO financing will provide the required funds on your behalf. Getting more orders means increased capacity for your company as well as increased performance needed for growth.
2. On-Time Delivery of Existing Orders
All businesses go through a cycle of ups and downs due to economic fluctuations. The peak periods, however beneficial, can also be overwhelming. Abrupt increases in growth means increased sales, which may at times outweigh the revenues. Due to this, operational costs reduce, causing a backlog on existing orders. Mitigating such delays means getting operational cash from sources such as purchase order financing.
Rather than put a hold on your customers’ order, PO financing allows you to deliver goods on time to your customers. If you are a startup, you certainly understand the struggle that comes with trying to stay afloat when fulfilling large orders Purchase order financing, therefore, helps you to take advantage of your growing seasons while helping you improve your daily performance.
3. You Do Not Have to Take a Loan
Loans are a loved source of funds as they provide a ton of benefits for any business looking to increase their revenues, whether it is through equipment financing or funds for expanding into new markets. But if you need finances for only purchase orders, will a loan be of any value?
Instead of taking up expensive loans that could put your assets up for sale, purchase order financing comes in handy at simplifying your funding process. PO financing lenders only charge an affordable fee for your current cash flow needs. Upon receiving payment from your customers, your lender allows you to offset the balance, ensuring you avoid loan payoffs. With such an instant source of capital, you get to increase your working capacity while reducing your costs.
4. PO Financing is Set Up Quickly
Gone are the days of traditional funding with their lengthy procedures and verifications. Purchase order financing has paved the way for quick financing, only requiring weeks to advance your financing needs.
With PO financing, lenders only need to ascertain that your request for funding is trustworthy and will be used to finance purchase orders. After the necessary verifications, you are free to continue delivery to your customers, making it a source of fast cash. You no longer have to experience delays on your end, allowing you to have better customer relationships. The result is more customer orders and increased opportunities, so why not try it out.
5. No More Turning Down Business
We all know that cash flow is an essential part of business, without which all operations come to a halt. Such is the case if you have to turn down business opportunities due to insufficient cash for your operations. Fortunately for you, you can avoid this by turning to purchase order financing. It helps you increase your operational capacity by providing the necessary goods and services to your customers on time. The result is more client outreach, as your business reaches new territories, as well as strengthening your market position against your competitors. Ready cash signals increased efficiency and will allow you to take advantage of more opportunities for rapid business growth.
Whether you have new orders coming in or are looking for ways to keep your business growing, purchase order financing is the way to go. It provides the perfect chance to scale your business to new heights. So, if you are looking to experience growth, we will make that work. LQD Business Financing offers you flexible PO financing solutions when you need working capital for any specific business need. Get started today and apply for purchase order financing from LQD Business Finance.