Here is What you Need to Know About Purchase Order Financing

Here is What you Need to Know About Purchase Order Financing

Struggling with payment of goods and services offered by suppliers? Well, purchase order (PO) financing might be the best solution to your troubles. With PO financing, you have an opportunity to pay suppliers using advances from creditors. To avoid confusion, we are going to walk you through the ins and outs of purchase order financing.

What is Purchasing Order Financing?

This form of financing entails the involvement of creditors who step in to pay money owed to suppliers of goods in advance. Purchase order financing is resourceful, especially when you want to avoid accruing bank debts and maintain cash flow in your business.

Stakeholders Involved in PO Financing 

Under this, there are various parties involved. Firstly, there is the borrower or business owner. You then reach out to a purchase order financing company to provide the required funds. The money is then sent to the supplier who provides you with goods. Finally, money remitted to the customer is transferred to the PO financing company.

How does it work?

First and foremost, you receive a large purchase order from your customer. Then, you submit a written funding proposal to the PO financing company for approval. If deemed necessary, the financer will pay the supplier to manufacture and deliver the goods. After receiving payment, the supplier is expected to deliver the goods as requested.

Upon receiving the goods, you are expected to forward the invoice to the customer. The customer should wire the money to the purchase order financing company. It is worth noting that the longer the customer takes to pay the more expensive the purchase order becomes.

Viability of PO Financing

As a business owner, you should determine situations that are fit for purchase order financing. Here are a few instances.

• Spontaneous increase in demand 

• Constraints in cash flow 

• Reducing shipment costs 

• Growth for startups  

Bottom Line

Purchase order financing plays a crucial growth in fueling growth for startups, maximizing the company’s equity, and avoiding bank debts. Get in touch with our offices at Atlas Capital Solutions today.