22 Apr

Fulfilling an Order with the Help of Purchase Order Financing

Bank financingWhether you’re a startup or a growing company, there will be instances when you will be short on cash. This usually happens when you have an order you cannot fulfill because it is big, and the order needs to be paid between 60 and 90 days after delivery.

A lot of companies resort to bank loans or give up altogether, but the good news is that there are financing companies that help with the purchase order.

Order Date and Payment Date

The inventory process depends on documentation. If there is no purchase order document, then there will be no product delivery and delivery receipt. Without a product delivery receipt, there is no invoice; without an invoice, there is no payment order — and no payment.

This string of events is what enables companies to accept orders and later on receive payment for them. This is also the reason companies are ill-equipped to handle large orders at a moment’s notice.

For a small company or a startup, when a large purchase order comes along, they might not be able to accomplish the order because they have already allocated all their finances and therefore not have the funds to manufacture the products in the requested time frame.

The Power of the Purchase Order

Purchase order financing allows the company to have additional funds to process the order based on the strength of the sales due to that order. They borrow money using the order as collateral.

Finance companies provide this loan assistance facility to manufacturers, retailers, wholesalers, and distributors. The only collateral is the firm order from the client in the form of the purchase order. The loan is repaid after the order has been paid.

A loan based on a purchase order is a big help to any business with limited finances. Considering the opportunity to bag a big order from a customer, the fees, interests and other finance charges are well worth it.