Whether you own a manufacturing company that outsources production or a wholesale business with a warehouse of goods for sale, purchase order financing could prove to be beneficial.
Benefit No. 1 – Enables small businesses to fill larger than usual orders
Oftentimes, smaller companies get their big break when receiving a large order from a big-box retailer, such as Target or Walmart. Becoming a business partner with one of these companies can accelerate growth markedly.
However, due to either limited available capital or lagging cash flow, small manufacturers or wholesalers can struggle to fill these orders without some sort of financial assistance. That being said, purchase order financing can be utilized to fill such an order from big-box retailers, without being forced to tie up too much capital, or capital that isn't available.
Benefit No. 2 – Fill an order without selling part of your business
One place to turn when a small business is unable to fill an order is financiers and investors. Essentially, owners are forced to sell equity in their company so they are able to take advantage of a game-changing opportunity, such as a million-dollar order.
This isn't necessary though, as purchase order financing allows manufacturers and wholesalers to obtain up to 100 percent of the funds needed to fill an order. With that said, small business owners who don't want to enter the "Shark Tank," and sell part of their company to Mark Cuban, might want to consider this type of lending agreement.
Benefit No. 3 – Obtain funds much quicker than from a bank
Small business owners who are on a deadline, and need their funds fast, could benefit from purchase order financing. Generally, lines of credit through this type of financial agreement are easier to qualify for and are approved and deployed much faster than those obtained through a bank.