Purchase Order Funding or PO Funding is a financial tool which permits an undercapitalized or fast-growing company to expand its business beyond what a traditional lender can support. The entrepreneur is able to utilize Purchase Order Funding to do this primarily because of the strength of a confirmed purchase order from a credit worthy customer rather than the size of the company’s balance sheet, or the availability of external collateral.
STAR requires that its client be in a pre-sold environment to fund a transaction. Therefore, unsold inventory does not qualify for Purchase Order Funding and other types transactional financing. STAR permits companies to bid for larger contracts because it provides up to 100% funding for a transaction. STAR literally designs a program to meet the specific needs of its clients.
Transactional financing permits the entrepreneur to spend more time on marketing, sales and manufacturing, rather than worry about raising additional capital to finance growth. With each new transaction, STAR builds a closer understanding of the client’s business. This builds confidence and leads to a strong relationship between the client and STAR. The entrepreneur in effect borrows STAR’S capital to grow the business, rather than add new investors. Hence the entrepreneur retains control of the company.
There are two basic types of Purchase Order Funding, namely: Funding Finished Products and Funding Work In Process.
Most of the Financiers in this business will only do Finished Products. STAR, however, will consider both.