The Advantages of Purchase Order Financing

For many companies, dreams can become nightmares. This can happen when they finally receive a big order from a major client, only to find they don’t have the money to pay their suppliers and deliver the order in the short period of time stipulated. Having to turn down a huge deal can be more than just disappointing, but can compromise a company’s reputation. Don’t let this happen to your business, but look into purchase order financing that will grant you the funds to fill a large order without the headaches.


Financing for orders can be secured more quickly than a conventional bank loan and without the complex paperwork and the waiting. If the lender feels confident that your company can fill the order and the client can pay, then the lender will cover the costs of producing the items and delivering them. When the client is ready to pay, the lender will accept the payment and give your company the percentage. If the payment is not due immediately, the lender may buy the invoice.


The convenience of this kind of financing is one reason it is preferable to a bank loan or other kinds of short-term loans which carry huge premiums and high interest rates. As long as your business has a history of strong performance and your client has a solid credit rating, a lender is likely to pay for processing and deliver the order. The idea is that the lender feels he or she is likely to be repaid, because there is an order that is being processed and will most likely be paid for. Therefore, can seem less risky for the lender than a regular loan.


Of course, there are some risks the lender takes. The order may become damaged or the client doesn’t pay. For this reason, fees may be higher on this kind of loan, but companies still prefer use purchase order financing than to let opportunities pass them by. For many businesses, an initial order from a major client can be a game changer, because most clients are repeat clients and there is a likelihood that there will be more orders. In addition, recommendations and good reviews are valuable marketing tools, and a successful order will create new clients. Business owners know they cannot afford to let opportunities pass them by, and purchase order financing is a good way to ensure that there is enough money to process and deliver orders to the highest standard.

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