Purchase-Order Financing for Suppliers & Manufacturers
How manufacturing & supply-chain businesses can use Purchase-Order Financing to complete new orders
Here’s the situation: You are a small business that sells a cosmetic product. You have been in business two years and sell your product through an e-commerce portal. Your business is making profit and sells 10000 units every month. You get a call from a big retailer who wants to put your product in 100 retail locations. If your product sells, the retailer will take up your product for their locations across the country.
You are excited about the opportunity until you hear that the retailer will require 100,000 units from you by the next month. How do you raise the cash to make the product you sell and fill in this big order?
Use Purchase-Order Financing
As a small business owner, when you need cash up front to complete an order, purchase-order financing is one of the best ways to finance your order and keep your client happy. Purchase-order (PO) financing allows for short-term capital lending that covers the cost of manufacturing and shipping goods.
Purchase order financing involves a bank or lender who pays you, the supplier to manufacture goods that have been ordered to fulfill an order for a customer. This is an advance and will cover as much as 70-80% of the costs. The purchase order finance company will collect the invoice from the end customer and charge the company in need of funds, that is you, a small fee as interest. This fee is taken out of the collected invoice and the remaining amount is returned to the company.
In the above example, the supplier that manufactures the cosmetic product can be paid by a Purchase Order loan that you have brought on board to successfully complete the retailer’s big order. After you have shipped the units and received the invoice, the Purchase Order lender will be paid off by a factor.
Easy, right?
The basic flow of a Purchase Order loans is the same for all business and depends on the moving parts of your business rather than on more traditional parameters. If your business needs inventory to complete a big order and you do not have cash to produce that inventory, Purchase Order financing is an attractive option to handle your cash-flows.
Purchase Order financing can be a great solution for cash-poor small businesses or business that are new and getting started – and those who may find themselves unable to have access to traditional business loans.
Explore Purchase Order Financing options for your business through ZoukLoans an avail the most innovative best-in-market offerings. To learn more, click HERE or visit us at www.zoukloans.com