What is Purchase Order Factoring?
Purchase order financing is when your third-party supplier will be paid up to 100% of the costs required to produce and deliver the agreed-upon goods to your customer. Once your customer receives the goods, you invoice them for the fulfilled order, and they pay the purchase order directly to the lender. Then, the lender deducts its fees and pays you the balance.
Purchase order financing can be a good option for businesses that receive more sales and orders than they have inventory or cash to complete — and don’t want to take out a traditional small-business loan.
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Benefits of Purchase Order Financing
Can be used for various purposes, such as covering cash flow gaps, paying for short-term expenses, or investing in growth opportunities
Can help to obtain the needed inventory
Can help to quickly produce inventory of your own
Can improve your company’s current cash flow status
Your company may be able to close a greater number of sales each period due to an increased capacity for purchasing a variety of goods
You can capitalize on the best opportunities as they arise
You can boost customer satisfaction by getting orders delivered as quickly as possible
