Increase Cash Flow With Purchase Order Financing
Purchase order financing can be a great way for new businesses to increase cash flow. Traditional loans aren’t always an option for startups because it takes a while to build the credit history that banks look for. However, purchase order funding is far easier to obtain. In fact, even people with poor credit can usually qualify. This helps companies to secure the capital needed for inventory purchases and increased sales.
What Is Purchase Order Financing?
This type of financing is directly tied to your business’s inventory management and sales. The idea is that purchase order funding delivers payment to your suppliers directly, enabling you to get the right amount of inventory to fulfill customer orders. This is especially helpful for businesses that have a large number of customers or are in the process of growing their base.
When an approved customer submits a purchase order to your company, you can use it for purchase order financing. For example, if a client orders 1,000 pairs of jeans, this type of financing would deliver money for the order directly to the jean manufacturer (or your raw materials suppliers). The client receives the shipment, your suppliers get paid and everyone walks away happy.
PO financing can assist small business owners who may not have the capital on hand yet for large inventory purchases. You may be starting small, anticipating to slowly increase your sales, when a high-value customer appears requesting more product than you can normally deliver. With PO funding, that scenario isn’t a problem. You’re always ready to fulfill the largest orders.
How Can Financing With Purchase Orders Improve Your Cash Flow?
Cash flow involves regularly buying inventory and making sales. The more product you move and the more profits your business generates, the better your cash flow. To maintain healthy finances, your total sales need to stay strong and increase over time.
One way to improve cash flow is by attracting more customers. Your reputation plays a large part in this. When clients know you always deliver orders on time, it gives you a position of trust. Loyal customers talk to other people about you, and before you know it, you have a larger customer base.
Another benefit of PO funding for cash flow is that it frees up money for other needs. Instead of using all of your savings to buy inventory for the month, you can put some of the money towards improving your marketing strategy, launching a business website or hiring another employee.
Applying for this type of financing is easy. The most important step is choosing a lender with experience. After that, the sky is the limit.