Why Small Business Owners Are Opting for PO Financing

Small business owners who are trying to grow their operations often need financing so their businesses are not limited by the amount of cash-on-hand. As an alternative to taking out a line of credit or installment loan, many consider PO financing. There are several reasons why this type of credit product may be beneficial for companies looking for creative solutions to meet their liquidity needs


Fill Larger Orders From Bigger Clients


Getting into a big-box retailer could propel a small business towards reaching the next level of operational success. Rather than potentially missing out on huge opportunities, selling a PO can provide the cash to hire additional staff or buy inventory and raw materials. Many suppliers want payment before the finished goods are sold. Purchase order financing frequently helps small businesses deliver big.


Limit Debt and Retain Equity


A PO financing transaction is normally defined as a sale, rather than a loan that must be accounted for on the balance sheet. Small businesses regularly choose to limit the amount of debt taken on by the company to help qualify for traditional bank financing in the future. When working capital is needed quickly, this type of financing can be used instead of selling valuable equity in the business to raise the funds needed for growth.


Leverage Collection and Logistics Expertise


Once the purchase order is sold, the financier typically offers collection assistance to resolve any issues and ensure timely payment. They may also have logistics and supply experts on-staff who help smaller businesses when they are growing into filling bigger orders for larger clients. Taking leaps in growth can be challenging and PO financing companies are frequently able to assist when fulfillment issues arise.


Perfect Credit Is Not Required


Because smaller and newer business owners and their companies don’t always have the highest credit scores, traditional bank funding is not always available. Purchase order financing relies on the credit of the company making the purchase. Bigger, established companies making larger orders often have solid credit ratings and payment histories that easily meet underwriting requirements. To help mitigate risk, financiers normally take steps to ensure the PO can be fulfilled by the small business before funding the deal.


Get Cash Fast


Once a relationship is established with a PO financing company, it typically takes only a couple of days for funding to occur. Solving liquidity challenges by accessing needed funds quickly has the potential to usher in new growth and future success for the company.

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