Purchase Order Financing - The Benefits For Clients

Since the Great Recession, traditional bank loans have been harder and harder to obtain, sometimes squeezing good small businesses who may have just been having temporary liquidity issues. A great way to keep your business going is through Purchase Order Financing.

This type of financing is a safety-net financing for companies who have a solid purchase order ready to fulfill but do not have the funds to pay their suppliers or complete the order. Purchase Order Financing provides capital to pay suppliers upfront and help grow your business when cash is low.

All orders are critical to generating income but if the account is not paid, the company runs the risk of a tarnished reputation or delays in fulfilling their order to the end customer.

Typical instances of cash flow problems:

  1.  The company sales are through the roof but the working capital is low
  2.  Accounts receivables are 30 to 90 days out  
  3.  Suppliers are demanding payment on shipments or letters of credit
  4.  In-house expenses such as payroll cannot be met

One solution to low cash flow is Purchase Order Financing:

  1. Your buyer supplies you with a non-cancellable purchase order
  2. Financing company funds the purchase order (up to 100%) to your supplier
  3. Your supplier ships the goods to you as scheduled,  and you deliver to your buyer
  4. You generate an invoice
  5. Financing company will either charge fees that are taken off the invoice or buy your accounts receivable which is then paid off using factoring

Companies are turning to Purchase Order Financing rather than bank loans. Banks consider the liquidity of a company (and require collateral) and quite often turn them down for loans, whereas the purchase order finance company looks at the quality of your end customer.

Purchase Order Financing leaves you to do what you do best - building the product and ensuring your client remains happy. If that big order just came in and you do not have the proper cash flow to fulfill, let Z Commercial Capital help.