Small business owners may dream of landing large orders that could help them rapidly grow and enlarge their market share. If a big order from a major company comes your way, however, you may find yourself panicking because you do not have enough cash available to have the merchandise made and shipped. This is where purchase order financing may be able to help.
Financing for Small Businesses
This type of financing helps small businesses grow by covering their manufacturing and shipping costs for large orders. Generally, this financing is provided to companies that are distributors and work with manufacturers to acquire the products that they sell. If this describes your company, then this type of financing may be an option for you. You may be able to get financing even if your credit is not perfect.
Qualifying for Financing
You will usually be working with a lender or microlender in order to qualify for a purchase order financing. Your prospective lender will need to know certain details about your situation. It is especially important that you provide documentation of the order you have received. The lending company or financial institution will thoroughly research and evaluate the company that has placed the order, and will make a decision largely based on that company’s credit rating and likelihood of being able to pay. The more confident your potential lender feels about the corporation that has placed the order, the more likely they are to approve your request for financing.
How Repayment Works
When you acquire purchase order financing, your lender will need to feel extremely confident that the customer who placed an order with you will be able to provide payment for that order. This is because the lender will usually receive recompense directly from the customer’s payment. In some cases, the lender may also purchase the order invoice from you at a discount. Your lender will then pay you all that remains of the profits.
Why Financing Is Important
If you own a small business, then you know how vital it is to continue expanding your market share. Large orders are one of the best ways for you to accomplish this goal. Have you found yourself in a situation where you have received a large order but cannot cover the costs of fulfilling it? If so, purchase order financing may be your best option. This is especially true if the order has been placed by a reputable corporation that can be trusted to pay in full.