Purchase order financing is used by wholesale dealers to pay for large-scale orders. This kind of financing solution helps businesses secure the funds needed to buy large quantities of a product without straining their budgets.
Paying for large orders is often difficult for small companies because they lack the capital required for the purpose. This is the reason why many small business owners and entrepreneurs use order financing to finance large purchase orders.
What Are The Benefits Of Using Purchase Order Financing?
Purchase order financing has the following benefits that make them attractive for investors and small-scale business owners:
· It Is Easy To Apply For
Purchase order financing does not require companies to provide financial statements. Businesses can easily secure purchase order financing solutions without having to prove that they have the cash flows necessary to repay their loans.
Since banks hesitate to provide loans to entrepreneurs for purchasing equipment and raw materials, purchasing order financing can be availed by them to meet their immediate business needs.
· Purchase Order Loans Can Be Used To Completely Cover Product Costs
One of the most significant advantages of using purchase order financing is that it can be used to cover the entire cost of the purchase order. However, the purchaser must have a gross margin equal to a certain percentage of the total cost. The percentage of the gross margin is determined by the provider of the purchase order loan and it may also vary from customer to customer.
· Flexible Repayment Period
The repayment period of purchase order financing packages varies according to the size of the company, its profitability, and a number of other factors. A company with a good financial record can easily negotiate with the lender to obtain a longer debt repayment schedule.
· Purchase Order Financing Facility Can Be Availed Quickly
It does not take long to avail a purchase order financing package that completely covers the cost of the goods you have ordered. The first transaction can be funded within days and the remaining transactions are processed even quicker.
· Prevents Cash Flow Problems
Most small and medium companies usually do not have excess capital to fund their purchase orders. The size of their business may also prevent them from raising capital through various other means. In such cases, purchase order loans can easily help SMEs get quick access to funds and save themselves from experiencing cash flow problems.
To learn more about purchase order financing, get in touch with Gregg Marcus. He is an experienced commercial lending and insurance expert who has helps many entrepreneurs successfully establish their own companies.