Why do Purchase Order Financing Applications require Personal Information?

Many clients are usually perplexed when they find out that many purchase order financing companies require that they submit personal information about the owners as part of the application. "Why?", they ask. "I am not asking for financing for me, but rather for my company".

Let me give you a purely hypothetical example to show things from a different perspective. Obviously, as examples go, this one is a little extreme. This is done to emphasize the point:

Case 1 - Jill. She has a criminal background that includes felonies. Furthermore, she has a record of passing bad checks, not paying taxes and is currently being sued by credit card lenders and collection agencies. Jill decides to start a business, and the company is able to generate some sales. As a matter of fact, the company grows because Jill is such as persuasive salesperson (and owner). Jill decides that purchase order financing can help her.

Case 2 - Jana. Jana has no criminal background and pays her taxes on time. She has no open or pending lawsuits. Jana decides to start a business, and the company is able to generate some sales. As a matter of fact, the company grows because Jana is such as persuasive salesperson (and owner). Jana decides that purchase order financing can help her.

Both cases describe the same business. The only difference between these two cases is the owner background.

Would you feel comfortable funding Jill's business? Perhaps some business financing companies would - but most would not. Why? Well, for starters she is not paying taxes. That's never a good indicator and does not bode well for anyone. She is also being sued and has a criminal background. Some time ago I wrote about the 5's of business financing. One of the "c's" was Character. Specifically, the character of the business owner.

Unless your purchase order financing company knows you personally, the only way they can determine whether the business owner that they are dealing with is good to work with is by asking for a lot of personal information and doing due diligence. And remember, although your finance company may be providing the funds to your business, they depend on the business owners to carry out the plans and manage things diligently and honestly.

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