Purchase Order FInancing (POF) is a great way to obtain a cash advance to satisfy a customer order that you may not have cash or parts in stock to fulfill. Rather than turn away business, POF provides small businesses with a way to render business services. PO Financing has a streamlined process– the lender will pay the third party vendor or the PO Financing Company, one hundred percent of the costs needed to produce and deliver the request. Once the order is rendered, the company can send their payment to the finance company. How is this different from a normal business loan? A traditional loan simply has two parties involved: the business and the creditor/financial institution. However, with PO Financing, there are additional parties involved, including: your business, your PO Financing Company, your customer, and the vendor/supplier of goods. Statistically, fees on PO Financing typically range from 1.8% to 6% of the purchase order value per month.
Process for PO Financing
- Process for POF Financing
- Submit an application to the POF Financing Company – they will approve you for one hundred percent of the cost or a portion of the cost (you will have to pay the additional balance out of pocket) or the full cost depending upon your track-record and your financial reputation with the financial institution.
- Next, the POF Financing Order company pays the supplier to manufacture and deliver the order: Once your application is approved, the PO Financing company pays the third party vendor directly.
- After the supplier is paid, you can invoice your customer, and send a copy of the invoice to the financial firm.
- The customer pays the financing company.
- Once the financing company deducts their fee, it transfers the remaining proceeds to your business.