A business line of credit could help extend your business’s ability to grow and prosper. One of the methods of financing available to a business is purchase order financing (PO Financing). There are two types, finished merchandise and works in progress. If your business is struggling to obtain the necessary funding it needs, perhaps due to its growth or perhaps because another lender cannot extend the necessary credit, it may be time to look for a new source. You can get that source through Advance Funds Network. You no longer need to work so hard for a business line of credit that does not work for you from a lender unwilling to extend credit.
What Is Purchase Order Financing and PO Factoring?
Purchase order financing or PO Financing is different from traditional loans, but it is an effective type of business line of credit. The business owner is able to tap into the funds that will be coming in to the business in the near future. Because you already have confirmed purchase orders from customers who are creditworthy, you can tap into those funds earlier, and thus expand your business as you need to do so. You don’t have to prove your worthiness for credit by the size of the company’s balance sheet or the external collateral your business may or may not have.
Finished Merchandise Financing
The most common type of purchase order financing is through the method called finished merchandise. In short, this method follows a set of procedures that will lead to a win-win situation for both the client and the financier. Here is how it might work.
- The client confirms a purchase order from a credit approved customer. These often have open account terms, but some will sometimes include a letter of credit to the client that helps to enhance the transaction.
- The client then places the purchase order with the manufacturer or supplier.
- Advance Funds Network then evaluates the structure of the transaction and then opens a letter of credit to the business owner.
- Once products are ready to ship, they are inspected to ensure they meet the requirements and then the manufacturer presents documents against the letter of credit through the bank. Advance Funds Network then pays for the goods.
- The products arrive or may be drop shipped to the customer or shipped otherwise. Once the merchandise ships, the receivable is assigned to Advance Funds and thus the customers pay Advance Funds Network.
Works in Progress
Another type of business line of credit is the purchase order financing work in progress. In this case, the client is not purchasing a finished product. The company takes individual considerations in this type of situation before agreeing to the terms.
As a business owner, it is a good idea for you to focus on the options at hand rather than to worry about the limitations of other credit methods. Purchase order financing or factoring is one of the best business line of credit options today and Advance Funds Network makes it work for you.
