Purchase Order Finance

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Purchase Order Financing

Purchase order financing will help if you’re a distributor and have purchase orders that you just cannot fulfill as a result of you lacking funds. Unlike traditional bank finance, PO financing is straightforward to qualify for and can be established quickly. PO financing is a good way to assist your business growth without taking up bank debt or selling equity in your company. If sales surpass your incoming income then purchase order financing can be a decent fit to fulfill a brand new customer order.

In order to qualify for purchase order finance you need to sell finished goods (not raw materials or product components) to B2B or B2G customers with profit margins of 10%+. Startups will qualify, however the majority of your application depends on the trust of, and your past history with, your suppliers and customers. It can be simple to qualify for if your client and provider in the transaction are both well established and reputable companies.

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Benefits Of Purchase Order Finance

The most important benefit is that you will be able to fulfill larger purchase orders and grow your business.

Your company will enjoy additional benefits. A Purchase Order finance solution:

  • Is available to new companies/start-ups
  • Grows with your business
  • Always ready – use it only when you need it
  • Can be set up quickly, often in a week or less
  • Is easier to get than bank financing
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Do you qualify?

To qualify for purchase order financing, your company must:

  • Be a product re-seller/distributor
  • Have commercial or government customers
  • Have orders of $25,000 or more
  • Have transactions with a gross profit margin of at least 10%
  • Have orders without a guaranteed sale or delivery sale conditions

 

If you fit these categories, then you are well on your way to be funded!

Bottom Line

Purchase order financing is a good source of funding if your sales growth is outpacing your cash flow. For the best rates we suggest you have margins above 20% and have a long history with both your customers and suppliers.