It can be frustrating to have orders from customers that you cannot fill due to a lack of capital. In order to keep your business moving forward, there are financing options available. One option that may be useful in filling purchase orders is purchase order financing.
An Overview of Purchase Order Financing
Purchase order financing is a way to help ensure you can meet the demands of your products by customers when cash flow is a potential problem. The purchase order financing company provides the funding to your supplier to ensure that goods are delivered to your customers. The goal is to provide a bridge between the money needed to provide goods and the money received for those goods.
Why Purchase Order Financing Is Valuable
The primary reason for purchase order financing is valuable for companies is that it provides the opportunity to fill customer orders when the capital is not available within the business. Filling orders is how businesses generate revenue that can be used to reinvest into the business. Purchase order financing ensures that those orders can be filled so you can receive payment and keep moving forward with business operations.
The Process of Purchase Order Financing
When your company receives a purchase order, your supplier estimates the costs involved in filling it. Once you have that estimate, you can reach out to a purchase order financing company, who pays your supplier to fill the purchase order. The goods are sent to the customer, along with an invoice, from your company. The customer then remits payment to the purchase order financing company, and after they take their portion of the customer’s payment, the remaining balance is sent to you.
Whether you are a new business that needs to generate income or you are looking for extra capital to move to the next level, purchase order financing can be a good option. By bridging the gap between needing capital to fill orders and getting paid from customers, purchase order financing will help you keep making progress toward your operational goals.