Purchase order financing, also known as PO financing, purchase order funding, or purchase order loans, is an alternative funding solution that allows businesses to cover supplier expenses without interrupting cash flow.
Even with a strong business credit score and a decent amount of time in operation, your business could still be deemed risky by traditional tier one banks. If you’re looking for a funding solution that will help you pay suppliers without depleting your cash reserves, purchase order financing can offer a viable alternative.
PO finance is a short-term business financing option that allows businesses to have a lender supply the money to fund an order. They’ll then collect the payment from your customer and send you the remaining balance, accrued fees and interest, to cover. This is not a no doc loan, it is a funding option that requires documentation, a physical or digital order of purchase, in order to qualify for. PO financing comes in handy when cash flow is low due to seasonality or emergencies. As a business owner, financing purchase orders might be exactly what you need to continue operations in a pinch.
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Here’s how purchase order finance works in five simple steps:
Many times the purchase order financing lender will choose to cover a portion of the order, rather than the whole thing. This may mean 60% or 90%, it just depends on the size of the PO funding needed and the estimated date of payment.
Lenders that provide purchase order loans can be an attractive option for business owners, and they should be! It gives you a second to stop worrying about how you’re going to pay employees or buy necessary equipment and lets you run your operation without a hitch. Here are a few more reasons why PO finance is gaining popularity with big and small businesses alike:
No Business Credit Score Needed - The business credit score is not evaluated. The purchase order financing company is more concerned with the creditworthiness of the customer as they are the ones who must pay the PO on time and in full.
Short Term Only - There are no long-term commitments. Purchase order finance is only meant to be a short-term solution.
Low Fees and Costs - Compared to other alternative financing options, the fees and costs of purchase order funding are generally lower than other financing products.
Happy Suppliers - The PO financing company will pay the supplier directly and on time, which saves your business from interruption.
Growth Opportunity - Through this type of funding, businesses can continue financing purchase orders they might otherwise have had to decline, even if they don't have the cash flow they need on hand.
Working CapitalTransportation Company
Merchant Cash AdvanceBar Restaurant
Line of CreditPPE Wholesale
Alternative lenders such as purchase order finance companies have different requirements than banks that make obtaining funds easier, but they still have a list of qualifications that must be met by applicants.
Similarly to a bridge loan financier, a purchase order financing company may request:
Apply with our PO finance partner in as little as 5 minutes and receive alternative capital within 72 hours, or reach out for more help on what loan type is best for your business.