Purchase Order Financing
If you don’t have the money to buy the goods from your supplier to fulfill an order, PO Funding or Purchase order Financing might work for you.
You will also hear terms like Inventory Financing, Supplier Financing, Letters of Credit and Vendor Guarantees to describe the funding of your products to buy for resale versus advancing you monies against products you have already delivered.
By the amount of calls we receive at Triad, there is much confusion about the difference between Invoice Factoring and Purchase Order Funding. Lets walk through the steps of how each work and what types of companies they are each applicable too.
First, Invoice Factoring is available to any company that bills credit worthy clients and must give terms or wait to get paid. So if you sell Trucking, Staffing, IT, Consulting, Food, Wine, Paper, Barbeque Sauce, Bullets, etc. and you give your credit worthy client terms of Net 10 to net 120 days, we can advance you up to 95% against your invoice.
The key to Factoring is you must deliver the product or service. Until your client takes possession of the goods and are happy then a true Accounts Receivable has been created and a factoring company can buy your invoice.
Both PO financing and invoice factoring provide small and medium-sized businesses with access to working capital and improved cash flow. Funding can be obtained in a matter of days, and they are ideal sources of funding for new and young businesses because approval is based on the credit-worthiness of the customer, not on the balance sheet and credit history of the business or business owner.
In addition, unlike bank financing, which comes with credit line caps, both factoring and PO financing provide access to unlimited working capital. The amount of funding available is strictly a function of the number of purchase orders or invoices a company is able to generate.