purchase order financing

What is Purchase Order Financing?

Working Capital comes in many different forms. Some are more expensive than others. Some are suited for certain situations. And other types suited for different industries and applications. Purchase Order Financing is just one form of external funding that your business can apply for.

How well can your business leverage its resources to achieve the goals you have set for it? If your goal is to acquire clients, branch off into a new market, or simply navigate through a period where cash is strapped and all the capital is being used to grow the business along multiple avenues, working capital is an option that might become necessary if you want to make navigating these challenges as secure as possible.

Purchase Order Financing

Purchase Order Financing, as the name implies, is a type of working capital that, if leveraged correctly by your business can help facilitate purchase orders from your customers.

Let’s say for example you own a Kitchen & Cabinet distribution business. You receive a large purchase order from a contractor that needs to build 20 kitchens with your products. You don’t have the supply in-house to fulfill the order, so you have to put in an order to your supplier for the product that you need to fulfill the purchase order.

However, because your cash is spread so thin you don’t have the capital to order the product you need from your suppliers. In that case, AA Bankers would purchase the supply you need from your supplier. Once the transaction has been made, AA Bankers would collect payment from your customer, and return the funds to your business minus the fee for PO.

What are the advantages?

Because there’s not a loan being extended, rather a reassignment of payment from your customer to the Financier, the result is a flat fee.

There’s no interest rate.

In that sense, your business is not obligated to pay off a loan. Rather, on a transaction by transaction basis the funding is utilized and closed out. The flexibility of this kind of funding, the limited underwriting, and the line of communication between you and the Financier are the main advantages of this kind of funding.

Industries Purchase Order Financing Works Best:

  1. Manufacturing
  2. Distribution
  3. Retail
  4. Importing Goods

Let us help you

If you find yourself in this position, or you need funding in order to fund an expansion, reach out to us at info@aabankers.com. Drop us a line on our site and tell us about your situation. Ask us anything.

We want to help you grow.