Purchase Order Financing and Purchase Order Loans
You know that a purchase order is official proof that a customer wants to buy your product, but you may not be aware that you can benefit from a process called purchase order financing. In addition to specifying exactly what the client wants, purchase orders can also be used to help you get fast cash for your business when you need it most.
Everyone remembers their first purchase, whether it was a record album, an article of clothing or something special for a loved one. Being able to buy a product with your own money is like a rite of passage.
Likewise, when a customer decides to use their hard earned dollars to make a purchase from your company, it is akin to validation that you must be doing something right and your small business is well on the way to being profitable. This is why many businesses often frame and display the first dollar they make on the wall. Having purchase orders is almost as good as those dollars, even though you don’t actually have the cash in hand yet.
What is Purchase Order Financing?
When the purchase orders for your small business begin to pile up, it sure feels good. Sometimes, you may be so successful that the orders can come in faster than you can fulfill them. This is where purchase order financing can help.
Since purchase orders are simply requests for goods, they occur before any money changes hands. This means that you have to create or build the product first or service your client, with your own funds and then you get paid 30,60 or 90 days out. As a result, you could find yourself in a situation in which you do not have enough cash on hand to make the products so you can actually fill the order.
Of course, you want to demonstrate the viability of your business but this cannot be done without providing the goods that were ordered in the first place. Being low on cash and behind on purchase orders can happen easily to any business. Nevertheless, there is a way out.
Purchase order financing is an alternative lending option in which you can use your purchase orders to get the cash you need in a hurry. Typically, small businesses use this choice to obtain fast cash so they can buy the supplies and materials needed to fill the orders and it might only be for a short period of time.
What is the Difference between Purchase Order Financing, Purchase Order Loans and Factoring?
You may think this all sounds a lot like factoring. The two processes are similar but they have important differences.
Purchase order financing is used usually as a one shot deal and Cash advance companies like Payroll Financing Solutions is an excellent resource for short term cash needs. It is easy to get an advance and you can pay back the financing at any time.
When you use an account receivable factoring company they will want a long term relationship for years and will charge a very large upfront administration fee. Plus your client’s checks will need to be assigned to the Factor so your clients will know you are using alternative financing which may lead them to think you are having problems.
Where Do You Go for Purchase Order Financing?
When running a small business, having cash on hand can mean the difference between staying afloat and going under. You never know when an emergency or other cash shortage may occur. The best way to avoid going out of business or running out of cash is to know your options for getting access to fast cash when you need it.
Whether its account receivable factoring, cash advance funding or purchase order financing, the most important thing is to know who to call, quickly. Alternative lenders, such as Financing Solutions (www.fundmypayroll.com), can be there for you when you find yourself in a cash crunch over and over again. It isn’t unusual for FS clients to come back over and over again almost like a business line of credit from a bank.
Cash advance companies offer an easy application process and a fast answer to your request. In addition, with a cash advance or purchase order financing, the funds can be repaid in a matter of days, weeks or months, eliminating the need for a long term commitment. Every business should have a relationship with a cash advance company even if it is for the future emergency.