How Beneficial is Purchase Order Financing?

A transparent benefit that purchase order financing holds over a loan is freedom from the seemingly endless cycle of loan repayment. However, this is not the only upside to purchase order financing.

Edward DeAngelis 21 Jun, 2019 8:08 am businessfinancing,payment,financingcompany 17



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For growing businesses, purchase order financing is beneficial in the following ways:

Faster Payment to the Supplier

With purchase order financing, a lack of capital doesn’t have to lead to a delay in the fulfillment of a big order, or the failure to deliver at all. As soon as a deal is struck between a reseller and their financing company and purchase order financing is issued, the payment is provided to the supplier and goods can be delivered to the client. This advantage is not guaranteed with a loan, and the turnaround time between application and approval can often take months for many business loans. The approval process for purchase order financing, on the other hand, is typically measured in days.

Covers the Cost of your Order

Startup businesses typically require some creditworthiness to get a loan. In many scenarios, banks and money lenders are unwilling to provide loans to resellers with a negligible financial track record. Even if a loan is initiated, it is often unable to meet the full cost of a large order and the reseller must pay the remaining amount. Purchase order financing, on the other hand, covers the entire order cost and also saves the reseller from having to handle a loan repayment.

Leverages Trustworthiness (for all parties)

Trust is the root of all businesses. A customer or client typically only deals with a business when it proves itself to be trustworthy. As loan issuance takes time, it threatens to lose your business a profitable customer. With purchase order financing, the reseller can fulfill the order within the deadline and win the customer’s trust. This also increases the trustworthiness and brand reputation of the supplier with their broader market.

Another interesting aspect of purchase order financing is that it depends more on the trustworthiness of your manufacturer and your client. Because successful completion of a purchase order financing agreement requires the timely provision of goods and the timely repayment of contract obligations, any financing company willing to extend this funding to you will need to know that your partners can hold up their end of the deal. This way, smaller and less-established businesses can secure deals with large companies and leverage those large customers’ established history to complete the deal, even if they lack the resources to do so on their own.

Purchase order financing is a rather fascinating way to get deals done as a product supplier. For startups and smaller businesses, it can be a boon when used to meet urgent financial requirements and successfully fulfill major orders.

 

About The Author

Edward DeAngelis has been helping entrepreneurs by providing capital assistance since 2013. He is a lifelong entrepreneur himself, with three decades of business success in multiple industries. He is the founder and CEO of Amerifi, an alternative lender based in suburban Philadelphia. 

 

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