In Purchase Order Financing - Timing is Very Important

One very common reason purchase order financing transactions fall through is bad timing. Many times I have seen professional, competent business owners blow a transaction because they could not keep track their time frames.

Here is a story about a deal that went bust about 6 months ago. Some details have been changed to make this a fictional story, but the lesson remains.

A business owner had started a new company and was looking for purchase order financing They were hoping/expecting to get a $1,000,000 government order in about 4 weeks. We explained the process to him and it seemed to be a very good fit. We also explained that we can process individual purchase orders rather quickly, but setting up the initial account takes about 3 weeks. We suggested that they promptly submit an application to ensure that the proper financing was lined up should he win the transaction.

We did not hear back from this prospect until a month letter. He announced that the had just won the PO, which had an aggressive time frame. The supplier needed to be paid in two days and the goods delivered in two weeks.

Now, even in the best of cases, setting an account takes a minimum of one week. We prefer to budget for three weeks because life is seldom perfect. The client was advised that we would not be able to fund this transaction due to time frame issues , but would be happy to work on the next transaction.

The client looked for business financing in many other places but could not find someone willing/able to fund this transaction. Ultimately it fell through. To add further problems, he defaulted on a government order which is never good.

By the way - we would have loved to fund the purchase order. We declined because we knew, from experience, that we would not be able to live to the clients expectations. Now I ask this to all readers?

Is it reasonable to expect 1,000,000 in a few days, without having the financing company do any due diligence? Would you fund it? (if you answer yes, please email me your phone number!)

Taking the time to line up financing prior to winning the order was key to the success of this transaction.

It's unfortunate that this is not an unusual event. We see this daily. It's also very preventable. Just follow this simple rule:

'Don't sell any products unless you have the funds (or financing) to pay for product. Otherwise, you risk losing the transaction, your customer and your business'

Looking for business loan alternatives in Maine? Find out about factoring in Maine and invoice factoring in Maine.