A majority of small business owners haven’t taken the time to fully understand the benefits of purchase order funding. Most categorize the specialty financing service to its root, “purchase order”; and they aren’t wrong because it is one of the many benefits of purchase order funding available for most businesses. But what is purchase order funding (PO funding) and what business can benefit?
The simple benefit that most business owners are familiar with is the purchase order funding aspect. Depending on a business’s cash flow and credit relationship with a supplier, some companies might need cash assistance in filling orders. PO funding is the perfect solution for those companies in need of quick funds. This gets the warehouse and shelves stocked with goods and products available to generate cash flow.
Who Needs Purchase Order Funding?
Purchase order funding is common for businesses of various sizes and classifications. Wholesalers and distributors typically have storage of goods in a warehouse to sell to a retailer. These retailers rely heavily on these wholesalers to fill orders when requested. Any hiccup in the distribution channel could cause havoc, thus making purchase order funding necessary to prevent such chaos and lost revenue. Wholesalers would also have the option for multiple order funding to fill orders for multiple retailers.
Small Business Necessity
Small businesses have always had a disadvantage compared to larger corporations in terms of resources. Purchase order funding at times can be necessary for a small business that does not have the cash available. These small businesses need the goods in order to generate cash flow and sustain business.
Flexibility of Larger Orders
For small and large businesses, purchase order funding now offers the advantage of larger orders. Before companies would be limited to smaller orders because of cash restraints, but PO funding has broken down that barrier. Larger orders mean that these businesses can provide more goods to generate more revenue.
Be cautious when ordering a larger than normal order. Always consider trends and what products are selling well. If the larger order is to end up as spoilage or waste, it could result in more loss than profits.
Seasonal Business Perks
For businesses classified as seasonal, that first order of the season can be difficult to pay because the funds have not been generated coming off the offseason. Purchase order funding is a solution to stock the business for the customers and set the business off to a successful start of the busy season. These businesses have only a couple of months to fully maximize profits, these owners should not cap themselves on profits.
Different from Invoice Factoring
Purchase order funding is different from invoice factoring. While invoice factoring is used more to accelerate the cash from invoices, PO funding allows the business the assurance of having the goods on hand for your customers before the invoice has been created.
Is Purchase Order Funding a Viable Option for Your Business?
A business should never find itself in a position of not being able to promptly and efficiently fill a customer’s orders. If left unfulfilled, those orders and the related income could be potentially lost for good. Future orders from that customer could also be jeopardized. Purchase order funding provides for the timely payment of suppliers and manufacturers so that orders get filled, and revenue grows.
CFGMS services small to medium-sized businesses that intend to use Purchase order funding in order to grow their business. CFGMS knows how to quickly, effectively facilitate a transaction, from application through funding, in order to meet our customer’s unique working capital needs.
At CFGMS, we take pride in our business, we care about customer service and the client experience – and we know you do too. Apply today!