Perhaps the biggest challenge facing most manufacturers and distributors these days is that of limited capital. Without enough liquid assetsmoney flowing in these kinds of businesses, many of them are forced to limit the number of orders they can take and shy away from larger and profit yielding transactions, thus restricting their ability to make their business flourish. But these days may be seeing their last as purchase order financing now empowers our economy’s smaller businesses to take their enterprise to the next level.
Unlike typical bank financing where you apply for money well before you have the need for it, PO financing creates a friendlier and more efficient system for small and mid scale companies to quickly expand for a large order. Through a PO provider, manufacturers and distributors can readily finance their materials, labor, and delivery costs without needing to queue in the bank. Moreover, as these companies hold much relevant experience in dealing with all parties of the transaction, they can also offer assistance to your business’s operations and help in negotiating agreements and strengthen your ties with both your suppliers and clients.
To reap the benefits of this type of service, it is paramount that you first understand the purchase order financing basics and how they work.
Step 1: You company receives and accepts a large purchase order from a reputable or long standing client.
Step 2: Your PO provider makes the necessary references to verify and check on the credibility of your client.
Step 3: If your PO provider finds everything in order, your company will be given an approval to continue with the transaction.
Step 4: Your PO provider then sets up a bank draft or letter of credit to finance your transaction.
Step 5: PO provider then covers the costs of your manufacturer as well as shipment expenses.
Step 6: Finished products are delivered directly to the client.
Step 7: Upon receipt of delivery, you turn over your invoices to the client.
Step 8: Once payment has been made, you make the necessary reimbursements to your PO provider as well as cover the necessary fees involved.
PO financing has paved the way for an ideal funding assistance for businesses as they cover the entire amount needed to pay your expenses and make good on the large order. And it is a system that is available to companies outside of the US. Search for PO financing Canada, UK, or Australia, and you will find local lenders who are ready to work with your business.