This post originally appeared on startupnation.com/start-your-business
On today’s Business Beat, Jeff discusses purchase order financing, which helps companies fill orders they couldn’t otherwise without having the funding to pay for production costs.
Tune in to the Business Beat, below, to learn more about purchase order financing and how it could benefit your company immensely:
“Here’s the bottom line: It’s good to know of all of the various types of funding options available to you in your business when you need funding. Purchase order financing is a lesser known but important additional source that you need to be aware of.”
– Jeff Sloan
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Good morning, Paul!
We’ve featured from time to time on the Beat how critical funding is to the startup community, ranging from angel funding to bank loans to venture capital funding. Simply put, you can’t have a vibrant startup community unless you have sources of capital to fuel them. And we’ve got another one for you to consider today here on the Beat. That source of funding? Purchase order financing.
This type of financing is specifically used to fill orders that the company would be otherwise incapable of filling without having the necessary funding to pay for the cost of production. Managing cashflow is always a balancing act for small companies, particularly those, for example, that are in manufacturing, where large cash outflows are required to support the initiatives followed by large cash inflows once the customer pays.
Now, it’s the period in between those two major events that becomes very challenging, specifically for small businesses, and purchase order financing is intended to address that very specific cash challenge. You source this type of financing typically from purchase order finance companies. The key to obtaining it? You need a purchase order from a customer, which has really good credit worthiness and demonstrated track record of making payments on their purchase orders.
If approved, you receive the funding against the purchase order, and you use those funds to do the manufacturing of the goods that the customers bought from you. And you win because you have the capital in order to make the sale, produce the goods and receive the payment in association with a purchase order.
Here’s the bottom line: It’s good to know of all of the various types of funding options available to you in your business when you need funding. Purchase order financing is a lesser known but important additional source that you need to be aware of. More than that, though, you really need to match the right type of financing to your business’ needs.
Check out purchase order financing if it sounds like this could be the right type of funding to solve your business’ cash needs. I’m Jeff Sloan, founder and CEO of StartupNation.com, and that’s today’s Business Beat on the Great Voice of the Great Lakes, WJR.