Purchase order financing
is a very good method of obtaining quick capital and is an excellent
plan of action when cash reserves are low. Purchase order financing
is sometimes associated in situations where suppliers want payment up-front
or COD (but your customers, on the other hand, benefit from your 30
day or 60 day terms).
Therefore purchase
order financing brings you cash for necessary business expenses which
are needed on a day-to-day basis. Also, because it does not show up
as debt, it leaves you with potential for further financing if that
is needed. As a form of funding it is better than a loan or an overdraft,
as you do not need to offer any other form of asset as collateral.
Using purchase order
financing it is thus possible to finance the supply for your customer
before the customer actually pays you, and yet still retain the goodwill
of the customer who continues to enjoy the 30 or 60 day terms. It is
very popular with new and established businesses alike, but is especially
popular with new companies which are hardly ever cash-rich.