Today we will be doing a back to basics post. If you own a company and need purchase order financing, this post should help you find the best way to get to it. So, how should you approach getting purchase order financing?The first step is to get educated. There are a lot of misconceptions about what purchase order financing is - and how it works. You can find a lot of resources in the internet. One good place to start is at the po financing resource center. Or you can also go here.
The next thing you need to determine is if your company will qualify for it. Here are some questions you should ask:
1. Are your gross margins more than 20%?
2. Do you resell products that are manufactured by someone else?
3. Do you have a non cancellable purchase order from your customer?
4. Does your customer have good commercial credit?
5. Is your business up to date in it's taxes?
6. Is the company free of liens, lawsuits and judgments?
If you answered yes to these questions, there is a good chance that purchase order financing will be a good fit for you. There is also a good chance that you will be able to obtain po financing.
The next step is to start calling companies that offer po financing to get details of how their specific plans operate. Many of them will be able to give you an approximate quote over the phone. Be sure to do you due diligence and call a few companies to learn their plans.
Some companies, though not all, may recommend that you also get factoring. Many times, factoring is offered in conjunction with purchase order funding (learn about the advantages and disadvantages of factoring).
Bear in mind that po financing transactions can be complex and have many requirements. I haven't listed them all here, but this should give you a good idea if you qualify for po funding.
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Looking for information on purchase order financing? Read the purchase order finance blog
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