Fulfill Your Customers’ Needs Through Purchase Order Financing

It is a problem that happens to many companies.  You have a purchase order from a customer but you do not have the money on hand to pay the suppliers for the raw materials needed to fulfill the purchase order.  You try to go to the bank or other investors but they are unable to get you the funds to fulfill the order.  What do you do? Well one option your company has is purchase order financing. 

Purchase order financing is a financing option that would enable you to get your purchase order financed on a short term credit agreement.  How it works is that after a purchase order has been made, the financing company will determine whether or not the customer can pay.  If the customer can pay, the financing company will contact your raw materials supplier via letter of credit and the supplier will send you the goods to assemble. 

After the goods are assembled and sent out to the customer, you will await confirmation of the goods being received.  Once received, you will send an invoice, payable to the financing company, to the customer who will in turn pay the financing company.  Once the financing company is paid, they will take their fee and send your company the remaining cash.

Why is it a good idea? Well the main reason is that it fulfills a customer’s needs and will in turn, keep the customer returning to you with their business.  It is bad businesses to turn down an order you are capable of making solely because you were incapable of obtaining the raw materials.  Losing customers means losing money and that is a good way to run a company into the ground.  Purchase order financing is a great way to obtain a small amount of money quickly to complete a customer’s purchase order.