Use PO Financing and Never Turn Away a Large Order

For a business owner, what could be worse than having to turn down a big order because there aren’t sufficient funds available to purchase the materials needed to fulfill it? This scenario could equally well apply to a start-up company or to a well-established business.

The Start-Up Company

After months of prospecting work, this company just received its first really large order. The business owner is excited and immediately starts thinking about profits and future expansion. However, reality sets in when the supplier requires payment up front and the owner is confronted by the fact that his business has no credit history or banking support.

The Well-Established Business

This company has decent capital reserves and a good working relationship with a bank. The company gets the biggest order it has ever received, but then the owner realizes that the order is too big for the company’s existing line of credit and the bank has declined to increase it.

No Need to Refuse Large Orders

Purchase Order Financing (PO Financing) will avoid businesses of whatever size having to refuse substantial orders. If you have a verified purchase order, an alternative lender that specializes in PO financing will pay the supplier via a letter of credit. This transaction enables the owner to fulfill the order, but does not provide any extra funding for other things such as operating costs.

The Cost of PO Financing

A percentage of the value of the order is paid to the lender so the company owner might only receive between 45-65% percent of the invoice amount. Although PO financing may seem expensive, business owners need to balance the loss of a percentage of their profits against making sales that help grow their companies.

Conclusion

PO financing is an important financial option that can help any business accept large orders, build its reputation, and grow. Davis Commercial Finance can help you fulfill those big orders that you really can’t afford to turn away, so contact us today for more information.