Purchase Order Financing is a very flexible product, but it’s only helpful for a few types of companies. In this article, we will explain this type of financing so that you can determine if this is a good fit for you.
The Basics
When it comes to purchase order financing, the requirements are pretty easy, though this is what narrows down the companies that can use it.
Must be a reseller or use a single third-party manufacturer
Must have a profit margin exceeding 20%
Must have at least $100k in sales each month
Must work with commercial customers that have good credit
Advantages of Purchase Order Financing
As with other types of business financing, there are some advantages that come with it.
You can take larger orders
You don’t have to turn away clients because you don’t have the capital to complete the order
You don’t have to stress over supplier payments
When combined with factoring, you don’t have to stress over clients paying you
Who Cannot Use Purchase Order Financing?
As mentioned previously, only certain types of companies can use this type of financing, which means there are some that cannot. A company that is a direct manufacturer cannot use purchase order financing because the management of supplier payments is so much more complicated and the manufacturing process may not produce products that meet the requirements of the customer. This means the funding company will have to pay suppliers without being sure the order will be completed and delivered. However, there are funding options for manufacturers.
If you believe that your company may qualify for purchase order financing, contact JHF Capital for more information. They can help you learn more about your options for business funding, including this type of financing or if your company would benefit more from a different type of financing.
