Purchase Order Finance
If you are a manufacturer or distributor and your business receiving orders from large retailers you are having difficulty filling or manufacturing because of their size, purchase order finance may be a ready working capital solution for you. For many small businesses involved in goods, purchase order finance can often make the "Big Deals Happen".
How Purchase Order Finance Works
Purchase order finance, commonly referred to as P.O. finance, is used to finance the manufacture or purchase of goods where a firm, non-cancellable order exists from a large, creditworthy buyer. It is very often associated with offshore manufacturing where a factory (contract manufacturer) requires the posting of a letter of credit to make goods destined for a large retailer. It is, however, just as commonly used for normal domestic transactions as well.
For your business to qualify, our purchase order finance providers
will look at...
- Order Size: The size of the purchase order should be for $50,000 or more in goods (wholesale)
- Factory: Wherever located, the factoring must be a "legal" factory with a history of successfully producing the product.
- Firm Order: The purchase order must be a firm order without conditions which could negate the transaction once the goods are delivered.
- Customer: The retail customer must be creditworthy.
- Take Out: There must be a provision in place to "take out" the purchase order finance company once the goods have been delivered. (This is usually accomplished through factoring of the invoice once the goods have been shipped and received.)
Goods Only! Not Available for Service Contractors in Need of Mobilization Funds
Purchase order finance is customarily only available for financing the manufacture or delivery of goods. It is not available for nor can it be used as a source of "mobilization" money to perform a service contract. It additionally cannot be used to finance inventory that is not immediately deliverable. There must be a firm order for the goods where payment will be received in 90 days or less once the goods are delivered.
Find Out More
One of the best ways to further explore inventory finance and to see if its right for you and your business is to request our FREE booklet, "When Banks Say NO!...The Small Business Guide to Factoring." Its FREE, from Cash Flow Funding Solutions. (click here to order)
