Purchase order funding can be a valuable financial tool because it will allow your company to fulfill a purchase order that you received but do not have the needed capital on hand to fund.  The orders must be from your more financially stronger and quality customers in order to qualify for this type of financing.
 
Your company needs to have a solid working relationship with them and they in turn must have a proven track record of satisfactory bill payment after their orders have been turned into your invoices.

Purchase order financing can be useful if your current cash flow situation does not allow you to complete the purchase of products from your supplier for goods that you already have sold to your customers.

Who Qualifies for Purchase Order Financing ?

The requirements for purchase order financing are somewhat different than for factoring where the funding sources are primarily interested in the credit worthiness of your customers.
 
Purchase order financing requires something from both sides of the business transaction.  As the seller of the goods, your company has to have a proven history of being able to deliver the product to market in a timely manner.
 
Your company can be small, or even a startup operation, as long as the management team has a good record for efficient service.
 
Your customers that placed the orders have to be financially strong and possess the same proven track record of consistently paying their bills on time for the items that they have ordered from you in the past.
 
Basically, the purchase orders from your customers that you have the strongest working relationships with are the best candidates for purchase order financing.  The relationship you have with your customers and their financial strength is what the funding source is most interested in when determining financing eligibility.

What Type of Transactions Can Be Funded ?

         Purchase orders can be funded between the following:

• U.S. suppliers/manufacturers to U.S. buyers  
• U.S. suppliers/manufacturers to foreign buyers
• Foreign suppliers/manufacturers to U.S. buyers

Each transaction will be reviewed independently and will proceed upon its own merits.  Therefore, the cash advance amounts and the fees paid will vary depending on each individual situation.
 
The overall business relationship between the companies, their credit worthiness, the performance of the companies involved and the overall profitability of the transaction for both parties will ultimately decide whether a purchase order can be prefunded.

In Review

In reviewing the criteria for purchase order funding, your company needs to:

1. Have a strong history of delivering your product on time.
2. Use a low number of suppliers to create the product you sell.
3. Consistently create solid profit margins from your sales.
4. Have a strong working relationship with your suppliers. 
5. Have an experienced management team in place with knowledge of what your selling.

Your suppliers need to:

1. Be a reputable company in good financial standing (creditworthy).
2. Be able to produce and deliver the ordered product to you on time (by a specific date).
3. Produce a quality product (to minimize the risk of dissatisfaction by the end customer).

Purchase order funding works very well for companies that have the ability to sell their products, but just can't afford to buy the product.  The funding source will buy the product for them by sending the necessary funding directly to the supplier.  The funder then "sells" the goods to their client (you) at the same time you are selling it to your customers.

Startup and fast growth companies can benefit greatly from purchase order funding.  Once the order has become an invoice the Purchase Order Funding Source will require you to factor the invoice so that they will immediately receive their investment and fees back, thereby removing themselves from the transaction.

Lets be realistic.
 
In the present fast paced and lean economic environment you need to give your business every operating advantage possible to compete effectively in your marketplace.
 
Just as with accounts receivable financing, purchase order financing has been used by the multi-billion dollar Fortune 500 corporations for decades.
 
Now is the time for smaller businesses such as yours to take advantage of the same opportunities that the big players have had all along and level the playing field for you too.
 
We can help your company do just that.  This is a very sensible way for your business to acquire the working capital needed to grow your business and prosper in today's marketplace, until such time that you have the working capital available to fulfill your future orders.
 
While purchase order funding is more expensive than traditional lending sources, you need to realize the growth potential you would be losing if you did not take on the order simply because you could not fund it properly through your existing means of financing.
 
Since you will be growing your company it certainly makes good business sense to realize 'less' profit for a particular order rather than NONE at all.  Doesn't it ?

The only question now is:  What are you waiting for ?