A Tool for Small Businesses

In previous posts, both in this blog and in my other blog (invoice factoring blog) I've talked about the mistakes that small business owners make when they are looking for business financing - specifically factoring and purchase order financing. Today I am going to talk about PO financing true potential.

Most businesses -at least the successful ones - are limited by the capital or funding they have. Those that have it grow. Those that don't, stagnate or perish. Purchase order funding provides you a way out of that problem, provided your business meets certain criteria:

1. It must resell products (i.e. be a dealer)
2. It's must buy products for re-sale from another business or alternatively, have a 3rd party facility provide all manufacturing services.
3. It must have high profit margins (say > 20%)
4. Lastly, it must have credit worthy clients

The last point is crucial. If you are selling goods to creditworthy clients, such as large companies, po financing may be able to provide the funding you need. Basically, po financing covers the costs of paying your suppliers and enables you to handle large purchase orders.

Purchase order financing is also very different from conventional products such as business loans. For starters:

1. It's less cumbersome to obtain than a conventional business loan
2. There are no month-long-waits. Most approvals/denials are done quickly
3. The line limit is based on the size of the po, the credit quality of your clients and the quality of your suppliers

Although not a panacea, purchase order financing can provide the needed financing for many small companies.


---
Looking for information on purchase order financing? Read the purchase order finance blog