At first glance, PO financing can seem a bit complicated, involving many parties – you, your lender, your suppliers, and your customers. But, in reality, it’s quite simple and a great financing option for businesses that don’t have available cash, can’t (or prefer not to) get a business loan, and/or have limited credit with suppliers. Here’s how PO Financing works, step by step:
1. A customer places a purchase order with you for the product.
2. You get a written proposal from your supplier on the cost of the order.
3. You apply for PO Financing.
4. Once approved, your financing company submits a purchase order to your suppliers.
5. Your supplier sends your financing company an invoice.
6. Your financing company pays your supplier.
7. The supplier fulfills the order and provides your customer with the goods.
8. You invoice your customer and also send the invoice to your financing company.
9. Depending on your agreement, your customer pays you and you pay your financing company, or your customer pays the financing company directly, and your financing company will send you your remaining balance minus any fees.
Yes, there are a few more steps to the process than what comes with traditional financing; but the entire transaction is seamless, and the outcome is a win-win for all. You make a great sale, your suppliers get paid and your customers get their product.
