Here at The Commercial Finance Group, we’re proud to be a preferred provider of customized lending solutions for companies all over the country. Whether it’s a manufacturer in Los Angeles or a staffing provider in Atlanta, we can provide alternatives to traditional loans and other bank financing products. These services include factoring, receivables financing, and asset-based lending for companies who have found themselves rejected by traditional financial institutions.
One of the cash flow solutions provided by The Commercial Finance group that doesn’t get as much attention is our purchase order financing. In today’s blog post, we want to explore this B2B loan alternative in more depth, so that you can be better equipped to decide if it’s right for your company.
No matter what you’re trying to finance, whether it be a second location, hiring new staff members, purchasing high-dollar equipment, or simply making payroll while waiting for a large client to pay their invoice, please remember that The Commercial Finance Group is your partner for success.
With our help, hundreds of businesses have been not only able to keep their doors open, but able to mitigate cash flow problems and facilitate long-term growth. Our trained financial experts have over 40 years of experience in this industry, and we’ll never try to sell you a service that you don’t need.
Contact us now to learn more about how factoring can help your business, or keep reading to learn more about purchase order financing.
When Is Purchase Order Financing Necessary?
Sometimes B2B companies find themselves in a situation where they’ve won a bid for a large order, but because of cash flow problems, they don’t actually have the working capital that’s necessary to fill the order. This is a very unfortunate predicament in which to find your company, because the ability to handle large orders efficiently is what helps you to win the business of even larger customers in the future.
“If word gets around that a company is turning away business because they can’t afford to complete jobs, customer trust is diminished. Groups that considered giving that company their business will likely think twice. Therefore, to avoid such scenarios, it is imperative that businesses find the money that they need. For some companies, purchase order financing is a great way to go,” explains Paragon.
How Does Purchase Order Financing Work?
If you are currently in this position, or have found yourself struggling through this cash flow problem in the past, it’s important that you understand how purchase order financing from The Commercial Finance Group in Los Angeles can help.
There are two main methods for taking advantage of purchase order financing:
- A third-party company will agree to pay the supplier of your company for goods that are required in order to fulfill the job for your customer. In this scenario, purchase order financing operates as a cash advance for the required supplies, and may not cover the entire amount of the cash needed. Once funding is submitted, it becomes the responsibility of the purchase order provider to collect the full amount of the invoice from the end customer.
Why would the third-party company do this? Because they are able to make a profit on the transaction. The company experiencing the cash flow problems is charged a fee for the convenience of having their supplies purchased. The fees are taken out of the collected invoice. The remaining amount (if any) is returned to the original company.
- In the alternative purchase order financing scenario, the third-party company will actually open up a line of credit with the supplier in question. This is helpful for B2B companies with poor credit or few assets because it allows them to get the supplies they need to complete large orders in a timely manner.
Benefits Of Purchase Order Financing For Your B2B Company
As you can see, it will cost your company something to participate in purchase order financing. So why do it? The truth is the benefits often outweigh the negatives for most B2B companies.
These benefits include:
- PO Financing is not a loan, therefore it has no negative impact on your balance sheet
- PO Financing pays your suppliers or gives them vendor guarantees so you can preserve your strong working relationship
- PO financing allows you to take on bigger orders without risking default on your other financial liabilities
- PO Financing often comes with complete A/R Management which takes the problem of collections off your plate
Who Can Benefit From Purchase Order Financing?
The Commercial Finance Group has helped hundreds of businesses overcome their cash flow problems and fulfill large, profitable orders through purchase order financing. However, we’ll admit that it’s not always right for everyone. In some cases, factoring, receivables financing, or asset-based loans may be the better choice.
We’ve found purchase order financing to be a good fit for:
- Startups
- Turnarounds
- Unbankable Companies
- Companies with fast-growing client sales of more than $50,000 per month
- Companies in all industries who are in danger of turning down contracts because of cash flow problems
The Commercial Finance Group Provides Purchase Order Financing And More!
We are advocates for small to mid-sized businesses because we’ve seen the positive impact they have on the communities in which they’re located. The companies we work with are often family-owned, essential job creators, and the personal dreams of the people who founded them. We don’t want to see these companies lose out on business, or worse, close their doors simply because they encountered cash flow problems.
If you identify with any of the scenarios we’ve described above, we hope that you’ll contact The Commercial Finance Group in Los Angeles today. Our experienced financial experts would love to explain more about purchase order financing and other types of factoring, and help you make the best decision for the future of your company.
Whether you contact us directly or are referred to us by your trusted financial adviser, we will work hard to listen to your needs and recommend the alternative financing products we feel would be most beneficial to your success.
