Do you need PO lending

Your business needs a large amount of working capital fast. You received a huge order from a customer, and don’t have the money to fulfill it. You need to hire workers, buy raw materials and meet production expenses. And the bank won’t approve a loan. Do you have to turn that huge order down?

Bad idea. Letting a large order go can hurt your reputation, chase away a good customer, and fail to take advantage of an opportunity that could show the marketplace your business is in growth mode. Accept the order - and get access to the capital you need through purchase order financing.

Purchase Order Lending Explained

Get a purchase order from your customer. Arrange your order with your suppliers. If the order passes our due diligence we take it from there, issuing a letter of credit to your supplier, receiving payment from your client, and passing on all but a fraction of the profit to you. And since you never actually handle the money, it never shows up as debt on your balance sheet.

Purchase order lending works because we are basing its risk on the credibility and financial soundness of the end customer who places the purchase order - not on the finances of your business.

Here are some common business situations for which PO financing is often well designed to support:

• An established business receives a large number of orders during its peak season
• A new business start-up has a commercial line of credit that simply isn’t high enough yet
• A small business has an opportunity to expand and become a mid-sized business, but lacks the capital to do so

You owe it to yourself to consider PO lending as an option that may help you grow your business. And you may never have to consider turning down a big order again.

Learn More

For further information about us check out some of our past articles on Purchase Order Financing Basics and Government PO Financing.

Occasionally we get a call asking about purchase order factoring, which makes it clear to us that more reliable financing information needs to be available on the internet.

Why? Unlike the variety of creative funding solutions we do provide, PO factoring isn’t one of them because it doesn’t exist. Factoring is a completely different financial tool not directly related to PO financing in any way. Sure there are sites with dedicated pages discussing purchase order factoring, sometimes even blogging about it, but that doesn’t make it a real financial tool.

We can’t explain the need for some sites to misinform but we do believe that a potential client is better served dealing with industry experts who take the time to understand their working capital needs and have the knowledge to back up their services.

Purchase Order Financing Explained

As a new and/or small company with limited resources, how can you hope to support literally unlimited sales? By proving you do in fact have the orders.

The mechanism that lets you fulfill orders that seem larger than you can handle is called purchase order financing. Before we see how it works, lets back up and look at the conditions that might make it an option for you.

• Your company - You’re a wholesaler, distributor, government contractor or reseller of manufactured products (not services). But your credit history is short, and your cash flow tight.

• Your customer - A large, experienced or otherwise creditworthy company, retailer or government agency. As we will see, their stability is the key to deal.

• Your supplier - Demands payment from you upfront - money you don’t have, but a financier does.

• Your opportunity - Your customer places an unusually large order with you, and you have the purchase order to prove it.

That’s the situation. Here’s the solution:

1 - The purchase order becomes the collateral against which we take the risk of advancing the funds - up to 100% of your supplier expenses.

2 - We then issue a Letter of Credit or other form of guaranteed payment directly to your supplier. You never actually take out a loan at all.

3 - The supplier ships the goods you are reselling to your customer, who, upon receipt, makes payment to us.

4 - Minus a small commission we remit payment to you. You have fulfilled the order and made a profit without going into debt or even outlaying any of your own cash.

It’s a tool that allows you to grow without capital constraints - fulfill that big order and take your business to the next level. Finance purchase orders of any size. For literally unlimited sales. Not bad for a (formerly) small company!

Learn More

Our industry knowledge extends to an array of working capital solutions, such as PO financing, accounts receivable financing, invoice factoring and beyond. The first step is always to learn about your business and construct a plan that meets your needs now and moving forward.

So what is your next move? Consider the challenges. You will need to:

• Purchase the goods you need from your suppliers, with upfront money you don’t have

• Get the money you need from a bank, but without a long track record or history of impressive financial statements

• Accept not receiving payment from your customer until 30 or even 60 days after they receive shipment, creating a cash flow gap you can’t manage

Turning down the order, losing your customer to a competitor, and missing out on your big opportunity to grow? Not an option. But PO funding is.

With a large retailer backing the purchase order we can fund your order by sending a Letter of Credit directly to your supplier to cover the cost of the goods you need. Technically, you don’t actually borrow the money, and it doesn’t count as debt on your balance sheet. When the entire transaction is complete, you have fulfilled the big order, earned your biggest profit to date, and effectively become a bigger company.

Is Purchase Order Funding Right For You?

Here are some of the characteristics of businesses that most frequently can benefit from purchase order loans. Every case is different, but in general it requires that:

• You deal in manufactured goods, not services
• Your profit margin on the order will be 20% or more
• Your customer is established and creditworthy

If you meet these criteria, PO funding may be the best strategy for your first big test.

Learn More

Unlike other purchase order financing companies, we pride ourselves on taking the time to understand your business and then creatively structure a finance deal that maximizes your profits. New to PO Funding, check out some of our past blog posts including: What is Purchase Order Financing & Government PO Funding.

(Photo Credit: dlkinney)

No working capital, no growth, right? An importer or reseller’s ability to seize the next big opportunity depends on having the money to pay their suppliers. So where do you get it?

Options

Banks - Of course. If you’ve been running a profitable business for a few years, that is. And have great credit. But if this were the case, you’d already be able to access the working capital you need.

Investors - If you’re lucky. But don’t be surprise if they ask for a piece of your business, too - a deal breaker for many young businesses.

Purchase Order Loan - Yes. This tool is designed for smaller or start-up businesses that buy and resell or distribute hard goods. It works because you never actually have to handle the working capital - We provide payment (usually in the form of a letter of credit) directly to your suppliers, and then collect the end payment directly from your customer before passing it on to you (minus as small percentage).

Purchase Order Loan Benefits

Because a PO loan is based on the order itself - not on your current balance sheet - it can fund up to 100% of your obligation to your supplier on orders of virtually unlimited size. Unless your profit margin is small, purchase order funding may be your ticket to growing your business without needing help from a bank or other investor.

Learn More

New to purchase order loans? Check out some of our recent articles to get up to speed:

• What is Purchase Order Financing

• Government Purchase Order Financing

• Apparel PO Financing

(Photo Credit: Skeli)

Challenging economic times call for creative thinking.  You have burned the midnight oil cultivating new clients, new products and services.  Then it happens, you get the order.  First you celebrate, and then reality kicks in. How do I pay for this? The standard channels keep saying no: banks are shut down, friends are unwilling, and vendors are stressed to the max.  Who will support this tremendous opportunity?  

PurchaseOrderFinancing.com has a long history of coming up with creative financial solutions utilizing a variety of products such as PO funding, invoice factoring, & accounts receivable financing to fit your business needs.  Each transaction has unique nuances.  We try to modify our funding programs to the needs of the transaction.  Most finance companies demand the transaction be changed to fit their “my-way-or-the-highway” program.  Listening is the key to a successful relationship and what makes us stand out from other PO financing companies.  Our goal is to build a long term relationship with our client.  

Often we get the call saying: my factory says “I need…”. We discuss the transaction, needs/structure of your buyer, needs/limitations of your supplier.  Then we discuss how our funding program can work with each unique situation.  Everyone wins.   

How Does PO Financing Work

Purchase order financing can be easier to qualify for compared to traditional financing methods, and allows you retain full ownership of your business. You can qualify if: a) your business sells a tangible product to other businesses with a good track record of paying their bills; and b) you have good prospects for growth, usually provable by having a specific purchase order in hand.

Example, XYZ company receives a large purchase order - so large that they cannot financially afford to fulfill it. (Businesswise, they can’t afford NOT to.) By using PO financing, XYZ can ensure shipment and delivery to its customer when the finance company pays XYZ’s suppliers directly. This is usually done with a Letter of Credit. The customer gets their goods and pays the invoice to the finance company, who pass along 95% or more of the proceeds to XYZ company.

Purchase order financing is available to new and established companies with a growing business. Wholesalers, resellers and distributors are likely candidates. Bypass the investor and the banker, keep your ownership and equity, and choose the option that lets you grow.

Learn more

For further information about us check out some of our past articles on Purchase order Financing Basics and Government PO Financing.

For further information please see our press release:

“Purchase Order Financing Site Highlighted on Entrepreneur.com”

In this challenging economy you are looking into new territories, markets and industry channels, some of those may be based outside the US. Unlike most purchase order financing companies, we work with businesses seeking growth in foreign markets such as Canada, Mexico, China, UK and through out SE Asia. Whether you are looking for PO financing in Canada, purchase order financing in Mexico or PO funding throughout the EU, our international PO financing program is designed to assist your business to grow and expand in the global marketplace.

What is purchase order financing

Every business faces the challenge of managing cash flow. One tool to make it easier is purchase order financing. It gives you access to working capital in a manner that is quick, convenient and affordable. Companies use purchase order funding to support an expansion, handle a large order or surge in business, and even occasionally for operating expenses. The tool is particularly well suited to newer companies that cannot get authorized for a traditional business loan. Manufacturers, distributors, importers and exporters are good examples. Lets say your suppliers want you to pay cash on delivery, but your customer won’t pay you until 60 days after they receive your finish product - a classic cash flow problem, which purchase order financing is designed to solve. Here are some other applications:

• Inexperience in generating financing
• Lack of working capital
• Need to keep suppliers and customers separate
• Desire to avoid credit risk (PO financing is not considered debt)
• Immediate sales need calls for fast response
• Profit opportunity

How does purchase order financing work

Purchase order financing involves issuing letters of credit to suppliers of finished or non-finished goods, based on specific, tangible goods that have been presold to a creditworthy end customer. It can help you deliver on time, increase market share, and grow without selling equity or incurring bank debt. You will need to supply financial information about your company, customer and supplier. We take care of the rest, usually offering approval and getting your short-term funding to you in as little as two weeks. You can use this cash flow management tool to meet future growth opportunities, too -once your account is set up, the process is faster still.

Learn More

For further information about us and our international purchase order financing program call us toll free today at (800) 385-0660. Also check out some of our past blog posts including what is purchase order financing and purchase order financing basics.

(Photo Credit: NASA)

For further information please see our press release:

“Purchase Order Financing Site Highlighted in Entrepreneur Magazine”

In today’s down economy, traditional lenders are unwilling or unable to invest in new business start-ups, no matter how promising the concept. Purchase order funding can be the life line that provides capital even in a down economy, because funds are approved on the basis of solid orders you have received. If you can prove you’ll get paid, we’ll send a letter of credit to your supplier, and return all but a small percentage of the eventual proceeds to you. A classic win-win situation.

How it Works

First, the bad news. You have a promising concept for opening a new business, but cannot find a resource to provide the capital you need; and today’s damaged and stagnant economy does not inspire hope.

Traditional commercial lenders like banks, private investors, credit card issuers, equity firms, even well-to-do friends, neighbors and family members, are currently unwilling or unable to help. No one has the necessary combination of investment inclination and disposable income or retirement assets to back you. Protecting their own portfolio is paramount today, no matter how good your business idea may be.

The good news? There is a tool that provides capital to small businesses regardless of overall economic conditions: purchase order financing. Funds are approved on the basis of solid orders you have received but do not have the money to fulfill. (Hard goods only, not services.) If you can prove you’ll get paid, we will send a letter of credit to your supplier - when you complete the order, the supplier pays us, and we send all but a small percentage of the proceeds to you. Getting 95% of a sale’s profit is unarguably better than getting zero.

Starting up a new business in a loan-challenged economy may seem like an unrealistic goal. It won’t be easy, but PO funding may at least make it possible.

Learn more

For further information about us check out some of our past articles on Apparel PO Financing and Government PO Financing.

(Photo Credit: Tony Frissell, 1947)

A new breed of entrepreneur has developed in this challenging economy, the online government contract bidder. It’s the lure of easy money, good credit and high dollar transactions. As the old saying goes, “If it were that easy everyone would be doing it.”

Many different laws and rules are specific to each government body. Federal contracts are arduous and very process specific. Working with state and local governments can be very challenging, even requiring additional procedures beyond those of federal contracts. We offer a variety of PO funding programs tailored to government contractors and vendors. We work with you step by step and share our years of knowledge and experience dealing with financing government contracts.

So be prepared! Partner with a government purchase order financing company with experience funding at all levels of state and federal government. Learn the challenges, along with our creative solutions prior to winning a government bid. Because you may not have time after the fact to learn process or even worse educate your funder on it as well.

Visit PO Financing on Twitter for all the latest updates. We look forward to talking with you soon!

Learn More

Whether you are new to PO Financing or not, you may benefit from some of our recent articles including:

• Apparel Purchase Order Financing

• What is purchase order financing

The world is a dynamic environment. Like fashion, economies change, and not always for the better. The financial crisis is still impacting small businesses rather aggressively. Banks are not lending. Many commercial finance companies view the clothing world as trendy and risky. Where are apparel companies to turn for financial support?

Purchase Order Funding looks to the credit worthiness (and good fashion sense) of your customer. We work with your manufacturer to get your garments produced on time. We then work with your customers to ensure payment of the invoice. Through our customized apparel PO financing programs we are there to support your sales success with our financial strength. We rely on your fashion sense, you rely on our financial sense.

PurchaseOrderFinancing.com also can factor apparel accounts receivables. Since we do both sides of a purchase order transaction, we gladly welcome the opportunity to service your accounts receivables financing and factoring needs.

How it works

Purchase order financing is a turnkey financing solution to get your goods produced, delivered and paid by your customer. You provide a valid purchase order with a credit worthy customer and the expertise to manage the process. We provide payment to your supplier, thus allowing your goods to be produced and shipped. Payment is typically completed through issuing letters of credit. We continue to work with you through the collection of the invoice. Our goal is to make the transaction as smooth as silk.

Further Reading

New to PO financing? Check out some of our recent articles to get up to speed:

• Purchase order financing and Letters of Credit

• What is purchase order financing

Times are tough and money’s tight. Banks are still virtually “shut down”. But there is a way for businesses to get money, and grow. Purchase order financing is not difficult to obtain, even in difficult economic conditions, because it is based on the promise of a sale.

The problem it solves is one of timing: how do you pay a supplier for goods or raw materials before your customer pays you for your finished product? Through one of our purchase order finance programs we can issue a letter of credit to your supplier guaranteeing payment. You do your work, and ship the finished product to your customer, often a retailer. When they make their payment, you receive all but a small percentage that the financier earns for making the entire arrangement possible. Everybody wins.

It works because it is supported by the credit and finances of the end customer, not you or your supplier. So as a small company, you are not excluded from doing business with much larger ones. In fact, purchase order finance can provide virtually unlimited amounts of working capital, as long as the purchase orders are from creditworthy and reliable companies or government entities. The potential to grow your business is there, even in today’s tough economy.

We provide domestic and international purchase order financing to a variety of industries including: food, hardware, electronics, apparel, sporting goods, furniture and housewares. In some cases our fast financing programs can provide the funding in as little as 14 days of your initial call. Contact us today to learn more about us and what PO funding can do for your business.

(Photo Credit: fabbio)

Would getting a huge order from an important customer be the best thing that could happen to your business, or the worst? Turning it down for lack of adequate financial resources not only loses the order, but could lose you the customer for good. Fortunately, there’s a way to overcome that lack of finances and set your company up for rapid fire growth - purchase order financing.

Purchase order financing (or PO Financing ) comes into play when traditional bank credit is not available - your company is too new, small, under-capitalized, et cetera. It works by considering your purchase order to be collateral, and providing a letter of credit straight to your supplier. Your supplier will usually ship directly to your end customer (who must be a trustworthy, established business or government entity). When your customer makes payment, the transaction is settled and you receive the lion’s share of the proceeds.

Start-up resellers and wholesalers without a long history of profitability can use purchase order finance to fund a large order and spark significant growth. It probably won’t work for you if your profit margin is less than 15%, and it is not designed for service businesses, only hard goods.

So keep purchase order financing in mind when that huge order comes in. It might be the best thing that could happen to your business.

For further information please view our PO Finance FAQ & Purchase Order Finance Glossary .

(Photo Credit: millicent_bystander)

As a business owner, the worst feeling is turning down a big order. I put together a couple of scenarios to illustrate how you could avoid that in the future.

Scenario One: A new, start-up business gets its first big order. Thoughts of profits, new supplies and equipment, and future expansion come immediately to mind. But reality sets in when the supplier needs payment up front, requiring cash that just isn’t there. And as a new business, neither has the credit history or banking support. The big order has to be refused.

Scenario Two: A well-established business - with decent capital and a good bank - gets a huge order, the biggest in its history. Too big for its existing line of credit. Opportunity missed.

The solution to both situations is PO Financing (also called Purchase Order Funding). A third party will issue a Letter of Credit to your supplier, which serves as an advance on the the funds you have been promised in the form of your Purchase Order. Now you have the capital to fulfill your big order. What Purchase Order Financing does NOT do is give you any extra money, for, say, operating costs. You might receive somewhere between 45 and 65 percent of your expected invoice amount. And the financier earns a fee for its service, usually no more than 4%.

For new or established companies (US, Canada or International), Purchase Order Financing can help you accept larger orders, build your reputation, and grow your business. Is there any better feeling as a business owner?

(Photo Credit: Vramak)

Every entrepreneurial business opportunity has financial barriers. The bigger the sale, the bigger the upfront capital required. Let’s say one comes along that’s larger than any you’ve ever received before. Your business is small and/or new, and the banks won’t give you the funding you need, nor will private lenders. You can’t leverage a home equity or commercial real estate loan in time. You have to turn down the big order.

Or do you? There’s a mechanism in place designed to enable you to take advantage of your big opportunity: PO financing, utilizing letters of credit.

PO financing provides you with working capital based on verifiable purchase orders from creditworthy commercial or government entities. It’s not based on your company’s finances, but on that of your customer. In addition to filling a manufacturing order, you can use it to finance growth, buy-outs and buy-ins, refinancing loans, even mergers and acquisitions.

The money itself? Letters of credit. These are letters from a bank or other lender that guarantees payment for the purchase you cannot otherwise afford. The letter of credit assures your supplier they will be paid. Meanwhile it’s a good risk for the bank, who stands to receive a (relatively small) percentage of the profits.

We will arrange for letters of credit upon verification of your purchase order. An expected gross margin of 25% or more should be enough to give you confidence that this is a reasonable option for you. You can do this over and over again, but if your business grows sufficiently as a result, you should eventually qualify for traditional bank financing.

Companies that typically use PO Financing include out-source manufacturers, wholesalers and distributors, importers and exporters of finished goods, and resellers - well established firms as well as start-up companies utilize this financial tool in today’s banking environment

Feel free to contact us to discuss all of your purchase order financing needs. Learn more at our PO Finance case studies page.

(Photo Credit: Neogabox)