How PO Financing Rates Really Work

We get phone calls every day about pricing for PO Funding transactions. While the general cost is a basic function of our exposure in a transaction over a certain period of time, the rates are quite standard as well. As an organization we price our purchase order financing rates competitively and based on the needs of our clients business. Since we also offer Non-Recourse Accounts Receivable Factoring to our clients we have to keep those costs in mind.  Below we have compiled everything you need to know about Purchase Order Financing Rates.

What determines the rates for a PO Financing transaction?

Rates are typically determined by the complexity of the transaction. Many people feel the pricing is adjusted for risk, but not really. PO Funding finished goods will always be less expensive than PO Funding a Work In Process.

How can I calculate the PO Financing rates into my product costs?

Lender’s Exposure X PO Funding monthly(or daily/weekly) rate X Days/Weeks/Months outstanding

How do I get the best rates for my company?

PO Financing rates will vary based on volume and type of transaction to be funded. If you want to try and get better rates, make sure your presentation is buttoned up. If your lender feels you have everything in order they may feel inclined to give you preferred pricing. It shows you are organized and won’t be too challenging to work with.

Are there any hidden fees in PO Funding?

If you are working with an honest lender, there shouldn’t be. But things to come up. Typical add on fees(most of which should be from 3rd parties) for Purchase Order Financing transactions can include product inspections, additional warehousing(if necessary), wire transfers, bank fees, etc. Most of which should be laid out upfront during the planning stages with your PO Funding company.

Is there a way to cost effectively manage my PO Funding fees?

There are a few ways to manage PO Financing Rates. While some transactions are much longer than others it’s important to understand how to keep these fees low and the profits in your company. You can participate in the transaction by splitting costs. You can pay your PO Funding Company out early if you have the cash flow to do so. Or, you can negotiate more favorable terms with your vendor, manufacturer, or supplier.

How do I know if Purchase Order Funding rates will work for my company?

The best way to look at the costs of PO Funding is to factor them into your cost of goods(AKA COGS). If you do that properly you can  mark up your goods accordingly and you won’t cut into your profit too much. After all, we are all in business to  make a few bucks. Right?

Which PO Funding Company has the cheapest Purchase Order Financing Rates?

The actual rates are a small part of the costs associated with PO Funding. It’s important to understand which provider will help you fund your purchase orders  in the most cost effective way. Utilizing a provider like Star Funding who finances both the POs and the accounts receivable factoring can also help you keep your overall costs lower.

Getting started with Purchase Order Finance is easy. If you have or are expecting a PO that you would like to have funded please contact us today to learn more. You can apply online by clicking HERE or you can email us at info@starfunding.com or call us at 212-768-9900.  It’s never too early to start planning so reach out today and let’s get you set up.

 

 

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  1. Pingback: Government Purchase Order Financing - Know These 8 Things! | STAR Funding: Purchase Order Funding & Financing

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